This paper devises and tests a state-dependent approach to forecasting the downside risk of financial assets. The approach has three merits. First, it proposes downside risk prediction conditional on the state of the real economy to recognize the countercyclical nature of financial risk. Second,...

We show that option-implied jump tail risk estimated prior to earnings announcements strongly predicts post-earnings risk-adjusted abnormal stock returns. The predictive power of implied jump tail risk is particularly strong on extreme abnormal stock returns whose absolute values exceed 10%. The...

We employ a characteristic-based model to decompose total analyst coverage into abnormal and expected components and show that abnormal coverage contains valuable information about individual firm ex-ante crash risk (proxied by implied volatility smirk from options data). Specifically, one...