Motivated by the nature of asset pricing models, we investigate the cross-sectional relation between the market's ex-ante view of a stock's risk and the stock's ex-ante expected return. We demonstrate that an ex-ante measure of expected returns based on analyst price targets is highly related to...

We develop an ex-ante measure of expected stock returns based on analyst price targets. We then show that ex-ante measures of volatility, skewness, and kurtosis implied from stock option prices are positively related to the cross section of ex-ante expected stock returns. While expected returns...

We investigate the pricing of risk-neutral skewness in the stock options market by creating skewness assets comprised of two option positions (one long and one short) and a position in the underlying stock. The assets are created such that exposure to changes in the price of the underlying stock...

We propose the first factor model that explains cross-sectional variation in optionable stock returns. Our model includes new factors based on option-implied volatility minus realized volatility, the call minus put implied volatility spread, and the difference between changes in call and put...

We investigate the pricing of risk-neutral skewness in the stock options market by creating skewness assets comprised of two option positions (one long and one short) and a position in the underlying stock. The assets are created such that exposure to changes in the underlying stock price...

We propose a theoretically motivated and empirically robust factor model for option returns. The model consists of factors based on option illiquidity, option price, implied-minus-realized volatility, implied-minus-realized skewness, implied-minus-realized kurtosis, and the option market factor....

I investigate the relation between option prices and daily stock return serial correlation. I demonstrate that the variance ratio, calculated as the ratio of realized to implied stock return variance, has both a contemporaneous and predictive relation with stock return serial correlation. The...

Replacing equity return (as in the equity risk premium) with returns on an arbitrary contingent claim, we obtain a new class of economic risk premiums to impose upon candidate models. These risk premiums reflect the distance between the physical and risk-neutral moments for asset returns, can be...