{"id":{"repo_id":"ohiolink","oai_identifier":"oai:etd.ohiolink.edu:osu1364933300"},"canonical_url":"https://search.dev.ndltd.org/etd/ohiolink/oai:etd.ohiolink.edu:osu1364933300","repository":{"repo_id":"ohiolink","name":"OhioLINK","base_url":"https://etd.ohiolink.edu/acprod/odb_etd/ws/oai/oai"},"display":{"title":"Two Essays on the Cross-Section of Stock Returns","abstract":"This dissertation studies two distinct topics. First, I examine whether the idiosyncratic volatility discount anomaly documented by Ang, Hodrick, Xing, and Zhang (2006, 2009) is related to earnings shocks, and I find that a substantial portion of the idiosyncratic volatility discount can be explained by earnings momentum and post-formation earnings shocks. When these two effects are accounted for, idiosyncratic volatility has little, if any, return predictability. Second, I propose a parsimonious measure to characterize the severity of the microstructure noise at the individual stock level and assess the impact of this microstructure induced illiquidity on cross-sectional return predictability. One of the main advantages of this measure is that it is very simple to construct (requires only daily stock returns data). Using this measure I find that firms with the largest microstructure bias command a return premium as large as 9.61% per year, even after controlling for the premiums associated with size, book-to-market, momentum, and traditional liquidity price impact and cost measures. In addition, the bias premium is strongest among small, low price, volatile, and illiquid stocks. On the other hand, the premiums associated with size, illiquidity, and return reversal are most pronounced among stocks with the largest bias.","abstract_html":"This dissertation studies two distinct topics. First, I examine whether the idiosyncratic volatility discount anomaly documented by Ang, Hodrick, Xing, and Zhang (2006, 2009) is related to earnings shocks, and I find that a substantial portion of the idiosyncratic volatility discount can be explained by earnings momentum and post-formation earnings shocks. When these two effects are accounted for, idiosyncratic volatility has little, if any, return predictability. Second, I propose a parsimonious measure to characterize the severity of the microstructure noise at the individual stock level and assess the impact of this microstructure induced illiquidity on cross-sectional return predictability. One of the main advantages of this measure is that it is very simple to construct (requires only daily stock returns data). Using this measure I find that firms with the largest microstructure bias command a return premium as large as 9.61% per year, even after controlling for the premiums associated with size, book-to-market, momentum, and traditional liquidity price impact and cost measures. In addition, the bias premium is strongest among small, low price, volatile, and illiquid stocks. On the other hand, the premiums associated with size, illiquidity, and return reversal are most pronounced among stocks with the largest bias.","abstract_has_math":false,"creators":["Wong, Peter"],"institution":"The Ohio State University","degree_name":"Doctor of Philosophy","degree_level":"doctoral","degree_discipline":"Business Administration","degree_department":null,"school":null,"contributors":["Hou, Kewei"],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2013,"date_issued":"2013-07-05","date_published":"2013-07-05","updated_at":"2026-07-24T03:37:16Z","subjects":["Finance"],"languages":["English"],"rights":["unrestricted","This thesis or dissertation is protected by copyright: all rights reserved. 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Second, I propose a parsimonious measure to characterize the severity of the microstructure noise at the individual stock level and assess the impact of this microstructure induced illiquidity on cross-sectional return predictability. One of the main advantages of this measure is that it is very simple to construct (requires only daily stock returns data). Using this measure I find that firms with the largest microstructure bias command a return premium as large as 9.61% per year, even after controlling for the premiums associated with size, book-to-market, momentum, and traditional liquidity price impact and cost measures. In addition, the bias premium is strongest among small, low price, volatile, and illiquid stocks. On the other hand, the premiums associated with size, illiquidity, and return reversal are most pronounced among stocks with the largest bias."]},{"key":"dc:format","label":"Dc Format","values":["application/pdf","2.19 MB"]},{"key":"dc:title","label":"Title","values":["Two Essays on the Cross-Section of Stock Returns"]}]}],"canonical_facts":{"dc:contributor":["Hou, Kewei"],"dc:creator":["Wong, Peter"],"dc:date":["2013-07-05"],"dc:description":["This dissertation studies two distinct topics. First, I examine whether the idiosyncratic volatility discount anomaly documented by Ang, Hodrick, Xing, and Zhang (2006, 2009) is related to earnings shocks, and I find that a substantial portion of the idiosyncratic volatility discount can be explained by earnings momentum and post-formation earnings shocks. When these two effects are accounted for, idiosyncratic volatility has little, if any, return predictability. Second, I propose a parsimonious measure to characterize the severity of the microstructure noise at the individual stock level and assess the impact of this microstructure induced illiquidity on cross-sectional return predictability. One of the main advantages of this measure is that it is very simple to construct (requires only daily stock returns data). Using this measure I find that firms with the largest microstructure bias command a return premium as large as 9.61% per year, even after controlling for the premiums associated with size, book-to-market, momentum, and traditional liquidity price impact and cost measures. In addition, the bias premium is strongest among small, low price, volatile, and illiquid stocks. On the other hand, the premiums associated with size, illiquidity, and return reversal are most pronounced among stocks with the largest bias."],"dc:format":["application/pdf","2.19 MB"],"dc:identifier":["http://rave.ohiolink.edu/etdc/view?acc_num=osu1364933300"],"dc:language":["English"],"dc:publisher":["The Ohio State University / OhioLINK"],"dc:rights":["unrestricted","This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws."],"dc:subject":["Finance"],"dc:title":["Two Essays on the Cross-Section of Stock Returns"],"dc:type":["Electronic Thesis or Dissertation"],"thesis:degree_discipline":["Business Administration"],"thesis:degree_level":["doctoral"],"thesis:degree_name":["Doctor of Philosophy"],"thesis:institution_name":["The Ohio State University"]},"updated_at":"2026-07-24T03:37:16Z"}