We establish a relationship between the idiosyncratic risk of portfolios and a parsimonious group of market variables. Because we are able to summarize idiosyncratic risk with this small group of variables, we are able to design stress-tests that describe portfolio-specific risks as market...

This study examines the effect of litigation risk on the readability of corporate financial reports using the 1999 Silicon Graphics Inc. court ruling as a natural experiment. This ruling unexpectedly reduced the litigation risk of firms located in the states of the Ninth Circuit Court (treated...