This paper examines the applicability of the bootstrap approach to test for irrelevant risk factors that are potentially useless in misspecified linear stochastic discount factor (SDF) models. In the literature, the misspecification-robust inference with useless factors is known to give rise...

We provide the first comprehensive analysis of option information for pricing the cross-section of stock returns by jointly examining extensive sets of firm and option characteristics. Using portfolio sorts and high-dimensional methods, we show that certain option measures have significant...

We provide theoretical and empirical justifications for linking the realised co-skewness between the VIX and the S&P 500 to conditional equity premiums. The realised co-skewness, as a measure of hedging benefits, shows a significant (and independent to that of the variance risk premium) negative...