This study examines the Pastor-Stambaugh liquidity-augmented four-factor model to revisit whether the marketwide liquidity is indeed a state variable important for asset pricing in the U.S. equity market over the period 1/1966-12/1999. The study applies the Lewellen et al. (2010) two-pass...

We propose a new 3-step resampling approach to forecast portfolio tail risk conditional on the economic state. The approach first predicts economic states using a set of macroeconomic and financial variables. We then forecast the joint distribution of multiple assets in the portfolio according...

Systemic risk has drawn the attention of many researchers and financial institutions since the recent financial crisis. Popular systemic risk measures include CoVaR, CoES, MES and SRISK etc. However, there are only a few methods available on modeling these measures, and even less papers on...

This paper develops a Bayesian framework for the realized exponential generalized autoregressive conditional heteroskedasticity (realized EGARCH) model and adopts a standardized Student-t and a standardized skewed Student-t distributions for the return equation. The Bayesian estimators show more...

Decentralized finance (DeFi) lending has grown from nonexistent in 2017 to nearly 40 billion US Dollars in deposited funds in May 2022. Using cryptocurrency as collateral, the platforms match speculative margin trading with yield-seeking depositors lending coins pegged to the dollar (stable...

We introduce a new US uncertainty index which is more sensitive to consumer spending and therefore reflects households’ decisions. We find evidence that macroeconomic uncertainty shocks impose negative, statistically significant, and long-lasting effects on consumption, income and financial...

We combine high-frequency stock returns with risk-neutralization to extract the daily common component of tail risks perceived by investors in the cross-section of firms. We find that our tail risk measure significantly predicts the equity premium, variance risk premium and realized moments of...

In this study, we investigate the cross-section of option implied tail risks in commodity markets. In contrast to findings from equity markets, left and right tail risk implied by option markets are both large. Commodity specific variables exert the largest influence on tail risk, while there is...