The paper shows that lottery-like stocks are hedges against unexpected increases in market volatility. The loading on the aggregate volatility risk factor explains low returns to stocks with high maximum returns in the past (Bali, Cakici, and Whitelaw, 2011) and high expected skewness (Boyer,...

Previous research on insurer cost of equity (COE) focuses on single-period asset pricing models. In reality, however, investment and consumption decisions are made over multiple periods, exposing firms to time-varying risks related to economic cycles and market volatility. We extend the...