Abstract We show theoretically and empirically that the cross-section of stock return idiosyncratic volatilities contains useful information about the ICAPM. We construct a proxy cross-sectional bivariate idiosyncratic volatility (CBIV) for the covariance risk between the market and the unobserved hedge portfolio under the ICAPM. Consistent with the ICAPM pricing relation, CBIV is a robust and significant predictor of the equity risk premium. We further show that the return predictability of the tail index in Kelly and Jiang (2014) can be explained by the ICAPM covariance risk.

We examine the extent to which institutional investors herd in the U.S. corporate bond market and the price impact of their herding behavior. We find that the level of institutional herding in corporate bonds is substantially higher than what is documented for equities, and that sell herding is much stronger and more persistent than buy herding. The price impact of herding is also highly asymmetric. While buy herding facilitates price discovery, sell herding causes transitory yet large price distortions. Such price destabilizing effect of sell herding is particularly pronounced for speculative-grade, small, and illiquid bonds, and during the financial crisis.

This study examines the pricing of multivariate crash risk (MCRASH) in the Chinese stock market. Our findings indicate a significantly positive influence of MCRASH on the cross-section of future stock returns, with the MCRASH premium being notably higher in China than in the US. A plausible explanation for China's higher MCRASH premium is that Chinese stocks may experience greater loss magnitudes in left-tail events, leading investors to demand higher expected returns as compensation for bearing a unit of MCRASH. Additionally, the return effect of MCRASH is found to be significantly stronger for stocks of non-state-owned enterprises and those with lower media coverage. Finally, we construct a four-factor model comprising market, size, value, and MCRASH factors, which demonstrates superior explanatory power compared with the CH3 and CH4 models proposed in the literature.

This paper provides new evidence on the impact of the housing collateral lending channel on entrepreneurial activities by allowing homeowners to access property equity and invest in new businesses. We exploit dual housing property rights forms in China as an instrument, where complete access to collateral values is only legally granted to homeowners with full property rights (FPR), with no access for those without FPR. Using data from a large survey, we find that local house price growth significantly increases the probability of starting a new business for FPR homeowners relative to the control group. The effects are robust when we rely on the exogenous shock induced by the house purchase restriction and primarily driven by homeowners without household debt. Macro analysis supports a positive correlation between the concentration of FPR homeowners and employment and economic growth, where homeowners are better able to obtain external financing via the collateral channel.

Siblings are important sources of support. Male siblings, in particular, are valuable extended family resources in patriarchal societies such as China. This paper examines the effects of the number of brothers on household stock market participation in China. We find that having more brothers increases both the probability of stock market participation and the portfolio share in stocks. This positive effect is more pronounced for individuals who face high income risk, suffer from poor health, lack private insurance, and reside in areas with low financial development and high gender discrimination. In addition, the brother effect persists in recent periods. This evidence highlights the importance of informal risk-sharing networks in household investment decisions. Our results imply that demographic changes such as fertility decline might have unnoticed but sizable impacts on household portfolio choice, especially in countries with strong family ties.