We document that implied volatility (IV) curves extracted from short-term equity options frequently become concave prior to the earnings announcement day (EAD) reflecting a bimodal risk-neutral distribution for the underlying stock price. Firms with concave IV curves exhibit significantly higher...

We examine whether the poor unconditional performance of active equity funds can be justified by their superior returns during bad economic times. Using disappointment events in consumption growth as a better proxy for high marginal utility states, we find that the quintile of funds with the...

In addition to its well-documented alignment effect, managerial ownership may also value-destroying effects by shifting risk to managers and encouraging risk-substitution; that is, managers with relatively undiversified personal portfolios tend to pass up profitable projects with high...

Labor unionization has no causal effect on firm risk. Using a regression discontinuity design to study the impact of labor union elections on option-implied firm risk, we find that unionization per se does not affect investor perceptions about a firm's price, tail, or variance risk. This finding...

This study examines the effects of political uncertainty around US presidential elections on firm risk, expected return, trading activity, and dispersion of investor beliefs. To this end, we utilize information embedded in short-term options and exploit cross-sectional differences in firms'...

We examine whether the option market leads the stock market with respect to positive in addition to negative price discovery. We document that out-of-themoney (OTM) option prices, which determine the Risk-Neutral Skewness (RNS) of the underlying stock return's distribution, can embed positive...

We examine whether the option market leads the stock market with respect to positive in addition to negative price discovery. We document that out-of-themoney (OTM) option prices, which determine the Risk-Neutral Skewness (RNS) of the underlying stock return's distribution, can embed positive...

This study provides a critical assessment of long-horizon return predictability tests using highly persistent regressors. We show that the most commonly used test statistics are typically oversized, leading to spurious inference. As a remedy, we propose a simple Wald statistic, which can...