A spurious positive relation between EGARCH estimates of expected month t idiosyncratic volatility and month t stock returns arises when the month t return is included in the estimation of model parameters. We illustrate via simulations that this look-ahead bias is problematic for empirically...

"Campbell and Vuolteenaho (2004) and Brennan, Wang, and Xia (2004) recently argue that the value premium co-moves with investment opportunities and thus reflects rational pricing. This paper extends their analysis by showing that the ICAPM interpretation of the value premium also sheds light on...