News Sensitivity and the Cross - Section of Stock Returns

The Cross - Section of Stock Returns :

Inflation Risk and the Cross Section of Stock Returns

I establish that inflation risk is priced in the cross section of stock returns: Stocks that have low returns during inflationary times command a risk premium. I estimate a market price of inflation risk that is comparable in magnitude to the price of risk for the aggregate market. Inflation is therefore a key determinant of risk in the cross section of stocks. The inflation premium cannot be e...

Capital, Contracts and the Cross Section of Stock Returns∗

We present a tractable, static, general equilibrium model with multiple sectors in which firms offer workers incentive contracts and simultaneously raise capital in stock markets. Workers optimally invest in the stock market and at the same time hedge labor income risk. Firms rationally take agents’ portfolio decisions into account. In equilibrium, the cost of capital of each sector is endogeno...

Macro Disagreement and the Cross-Section of Stock Returns

This paper examines the effects of macro-level disagreement on the cross-section of stock returns. Using forecast dispersion measures from the Survey of Professional Forecasters database as proxies for macro disagreement, I find that highmacro beta stocks earn lower future returns relative to lowmacro beta stocks following highmacro disagreement states. This negative relation between returns fo...

Habit Formation and the Cross Section of Stock Returns¤

We develop an external habit persistence model where the time series of the aggregate portfolio and the cross section of stock returns are simultaneously studied and tested. By applying a slightly modi...ed version of the model of Campbell and Cochrane (1999), we obtain closed form solutions for individual securities prices and returns and a full characterizations of the dynamics of the risk-re...