We develop a novel method to decompose a straddle into two assets: a volatility risk asset and a jump risk asset. Using the price ratio of the jump risk asset to the straddle, we create a forward-looking measure (S-jump) that captures the stock price jump risk anticipated by the option market. We show that S-jump substantially increases before earnings announcements and strongly predicts the size and the probability of earnings-induced stock price jumps. We also find that S-jump amplifies the earnings response coefficient. Our jump risk asset captures the run-up and run-down return patterns observed for straddles around earnings announcements.

Government regulations on housing flippers target their high capital gains but ignore their risk-sharing function: rational arbitrageurs reduce market return volatility borne by other participants while undertaking high idiosyncratic risk. Regulations that tighten the limits of arbitrage in housing markets can adversely affect market efficiency by blocking this risk-sharing function. Using comprehensive housing transaction records in Hong Kong from 1993 to 2021, we find although flippers obtain higher annual capital gain returns than long-term buyers by 8.76 percentage points, they undertake substantially higher idiosyncratic risk due to its unique downward-sloping term structure. Only experienced flippers, who have at least two prior purchase experiences and constitute less than 20% of the flippers, outperform long-term buyers in risk-adjusted returns. Following the enactment of an anti-speculation policy that decreases the share of flippers by 14.2 percentage points in one year, the market return volatility of the entire housing market increases by 21.9%.