We investigate the uncertainty around stock returns at different investment horizons. Since a return is either a loss or a gain, we categorize return uncertainty into these two components. Loss uncertainty is the uncertainty surrounding negative returns, and gain uncertainty is the uncertainty surrounding any future gain. Investment opportunities can be evaluated by looking at these components.
Ricardo Lopez Aliouchkin
Staff Working Papers
We decompose total variance into its bad and good components and measure the premia associated with their fluctuations using stock and option data from a large cross-section of firms.