We propose idiosyncratic volatility based return spread as a new measure of the stock-level value of investor sophistication. We find that stocks with a high value of investor sophistication tend to have low average returns, and this effect is pronounced for highly short-sale constrained stocks....

In a model where investors disagree about the fundamentals of two stocks, the state price density depends on investor disagreements for both stocks, especially the larger stock. This implies that disagreement among investors in a large firm has a spillover effect on the pricing of other stocks...

This paper comprehensively examines the risk-return relation of cryptocurrency carry trade using realistic borrowing and lending interest rates. We find significant violations of the uncovered interest rate parity in the cryptocurrency market. The cross-sectional carry trade strategy yields an...

This paper comprehensively examines the risk-return relation of cryptocurrency carry trade using realistic borrowing and lending interest rates. We find significant violations of the uncovered interest rate parity in the cryptocurrency market. The cross-sectional carry trade strategy yields an...

We introduce learning into the hedge fund managers’ risk choice problem with imperfect information. We find that with a constant but unobserved expected return on investment, learning induces managers to take more risks and increases manager compensation. When the return is stochastic,...