Research

            Publication

Firm-Specific Risk and Equity Market Development (with Greg Brown), 2006, Journal of Financial Economics, Forthcoming

We show that the increase in firm-specific risk in the U.S. stock market is due to new listings by riskier companies. In addition, our results explain

why prior researchers have found that growth opportunities, profit margin, firm size, and industry composition (among other factors) are related to

increases in firm-specific risk. The new listing effect is not driven by small companies becoming riskier but instead by a riskier sub-sample of

the economy becoming publicly traded. These results are consistent with  prior research that documents time trends in financial market development.

Job market paper

The Next Microsoft? Skewness, Idiosyncratic Volatility, and Expected Returns, 2006

This paper analyzes the low subsequent returns of stocks with high idiosyncratic volatility, documented by prior research. There is substantial time-series co-variation between stocks with high idiosyncratic risk. I examine an alternative measure of aggregate skewness, the cross-sectional skewness of all firms at a given point in time. Cross-sectional skewness helps explain both the common time-variation and the premium associated with firms with high idiosyncratic volatility. Sensitivity to cross-sectional skewness is also related to the underperformance of Initial Public Offerings (IPOs) and small growth stocks. IPOs only underperform if they list in times of high cross-sectional skewness. These results imply that the low returns to IPOs, small growth stocks and highly volatile stocks are a result of a preference for skewness. Finally, proxies for technological change, such as lagged patent grant growth, predict future cross-sectional skewness. This suggests an economic interpretation of cross-sectional skewness as the result of changes in industry structure brought about by shocks such as significant technological change. 

Work in progress

The long and short (run components) of volume and volatility (with Eric Ghysels)

The impact of innovation on asset prices  (with Eric Ghysels and Koen Pauwels)