Traditional asset pricing tests boil down to evaluating the maximum Sharpe ratio obtained from the factors in a given model. This implicitly assumes the linear stochastic discount factor (SDF) that prices the factors as the asset pricing model. We generalize this approach by considering a...

This paper introduces a new tail risk measure based on the risk-neutral excess expected shortfall of a cross-section of stock returns. We propose a novel way to risk neutralize the returns without relying on option price information. Empirically, we illustrate our methodology by estimating a...

We document the forecasting gains achieved by incorporating measures of signed, finite and infinite jumps in forecasting the volatility of equity prices, using high-frequency data from 2000 to 2016. We consider the SPY and 20 stocks that vary by sector, volume and degree of jump activity. We use...

We propose a dilution bias correction approach to deal with the errors-in-variables problem observed in realized volatility (RV) measures. The absolute difference between daily and monthly RV is shown to be proportional to the relative magnitude of the measurement error. Therefore, in...

This paper examines the finite sample properties of novel theoretical tests that evaluate the presence of: a) Brownian motion, b) jumps; c) finite vs. infinite activity jumps. In allowing for Gaussian, t-distributed, and Gaussian-T mixture noise, our Monte Carlo experiment guides a search for...