This article examines the link between several well-known asset pricing “anomalies” and the covariance structure of returns. I find size, book-to-market, and momentum strategies exhibit a strong, weak, and negligible relation to covariance risk, respectively. A size factor helps predict future volatility and covariation, improving the efficiency of investment strategies. Moreover, its premium rises following increases in both its volatility and covariation with other assets. These effects are amplified in recessions. No such relations exist for book-to-market or momentum. These findings may shed light on explanations for these premia and present a challenging set of facts for future theory.

This article examines the link between several well-known asset pricing "anomalies" and the covariance structure of returns. I find size, book-to-market, and momentum strategies exhibit a strong, weak, and negligible relation to covariance risk, respectively. A size factor helps predict future volatility and covariation, improving the efficiency of investment strategies. Moreover, its premium rises following increases in both its volatility and covariation with other assets. These effects are amplified in recessions. No such relations exist for book-to-market or momentum. These findings may shed light on explanations for these premia and present a challenging set of facts for future theory.

We develop a model of informal financial networks and present corroborating evidence by studying the role of property brokers in the U.S. commercial real estate market. Our model demonstrates that service intermediaries, who do not themselves supply loans, can facilitate their clients' access to finance through informal relationships with lenders. Empirically we find that, controlling for endogenous broker selection, hiring a broker strikingly increases the probability of obtaining bank finance. Our results demonstrate that even in the United States, with its well-developed capital markets, informal networks play an important role in controlling access to finance.

We develop a model of informal financial networks and present corroborating evidence by studying the role of property brokers in the U.S. commercial real estate market. Our model demonstrates that service intermediaries, who do not themselves supply loans, can facilitate their clients' access to finance through informal relationships with lenders. Empirically we find that, controlling for endogenous broker selection, hiring a broker strikingly increases the probability of obtaining bank finance. Our results demonstrate that even in the United States, with its well-developed capital markets, informal networks play an important role in controlling access to finance.