We use an empirical model to categorize firms into portfolios based on operational risk. Using these portfolios, we show that a strategy of buying firms in the highest decile of operational risk and shorting firms in the lowest decile of operational risk earned a positive but insignificant...

Using the implied volatility smirk on individual equity securities to measure perceived tail risk, we find that better environmental, social, and governance (ESG) practices and better practices in each individual E, S, and G pillar significantly reduce ex-ante expectations of a left-tail event....