H. Park, B. Kim, H. Shim, “A Smiling Bear in the Equity Options Market and the Cross-Section of Stock Returns,” (working paper series)

Abstract: We propose a measure for the convexity of an option-implied volatility curve, IV convexity, as a forward-looking measure of excess tail-risk contribution to the perceived variance of underlying equity returns. Using equity options data for individual U.S.-listed stocks during 2000-2013, we find that the average return differential between the lowest and highest IV convexity quintile portfolios exceeds 1% per … Read More »


P. Schneider, C. Wagner, J. Zechner, “Low Risk Anomalies?,” (working paper series)

Abstract: This paper shows theoretically and empirically that beta- and volatility-based low risk anomalies are driven by return skewness. The empirical patterns concisely match the predictions of our model that endogenizes the role of skewness for stock returns through default risk. With increasing downside risk, the standard capital asset pricing model (CAPM) increasingly overestimates expected equity returns relative to firms’ … Read More »


A. Eisdorfer, E. Kohl, “Corporate Sport Sponsorship and Stock Returns: Evidence from the NFL,” (working paper series)

Abstract: Most of the home stadiums/arenas of major-sport teams in the U.S. are sponsored by large publicly traded companies. Using NFL data we find that stock returns to the sponsoring firms are affected by the outcomes of games played in their stadiums. For example, the mean difference between next-day abnormal returns after a win and after a loss of the … Read More »


R. Israelov, L. Nielsen, “Still Not Cheap: Portfolio Protection in Calm Markets,” (working paper series)

Abstract: Recent equity volatility is near all-time lows. Option prices are also low. Many analysts suggest this represents a good opportunity to purchase put options for portfolio insurance. It is well-known that portfolio insurance is expensive on average, but what about in calm markets? History suggests it still is. We investigate the relationship between option richness and volatility across ten … Read More »


B. Feunou, M. Jahan-Parvar, C. Okou, “Downside Variance Risk Premium,” (working paper series)

Abstract: We propose a new decomposition of the variance risk premium in terms of upside and downside variance risk premia. The difference between upside and downside variance risk premia is a measure of skewness risk premium. We establish that the downside variance risk premium is the main component of the variance risk premium, and that the skewness risk premium is … Read More »


J. Joenvaara, M. Kauppila, “Hedge Fund Tail Risk: Performance and Hedging Mechanisms,” (working paper series)

Abstract: We decompose hedge fund tail risk into two components: Systematic Conditional Tail Risk (SCTR), which arises predictably from equity market exposure; and Idiosyncratic Conditional Tail Risk (ICTR), which arises from proprietary alpha investment technology. First, we show that low-SCTR hedge funds deliver superior risk-adjusted returns, but not average returns. In contrast, low-ICTR funds provide both higher risk-adjusted returns and … Read More »