The well-documented negative relationship between idiosyncratic volatility and stock returns is puzzling if investors are risk-averse. However, under prospect theory, while investors are risk-averse in the domain of gains, they exhibit risk-seeking behavior in the domain of losses. Consistent...

We test the dynamic aspects of the loss aversion feature of Kahneman and Tversky (1979) and find that idiosyncratic volatility is negatively associated with unrealized gains of stock returns. Moreover, we show that this negative relationship is stronger for stocks with high individual investors'...

This dissertation consists of two essays. In the first essay, I examine the source of momentum in stock returns. The reversal of momentum returns has been interpreted as evidence that momentum results from delayed overreaction to information. I examine momentum and reversals conditional on...

Prior studies have linked long-term reversals to the magnitude of locked-in capital gains, suggesting that reversals are driven by tax effects and not overreaction. We show that locked-in capital gains do not explain the reversals in winners when winner returns are based intangible information...

Consistent with the hypothesis that momentum profits are attributable to the cross-sectional dispersion in expected returns, Bulkley and Nawosah (2009) report that momentum is nonexistent in demeaned returns. Motivated by their work, I examine whether absence of momentum in demeaned returns is...

This dissertation consists of two chapters. The first chapter shows that the measurement errors in betas for stocks induce corresponding measurement errors in alphas and a spurious negative covariance between the estimated betas and alphas across stocks. This negative covariance between the...

We study the interrelation between the size and winner-loser effects in U.S. stock re-turns, including their response to extreme returns. We find that size effect and winner-loser effect are present in data up to 2017. These are related but separate effects. How-ever these effects are due to...