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This paper revisits some recently found evidence in the literature on the cross-section of stock returns for a carefully constructed dataset of euro area stocks. First, we find evidence of a negative crosssectional relation between extreme positive returns and average returns after controlling for characteristics such as momentum, book-to-market, size, liquidity and return reversal. We argue that this is the case because these stocks have lottery-like characteristics. Second, when we control for this relation, the idiosyncratic volatility puzzle seems to disappear. When extreme positive returns are included in the regression, we find a weak but positive relation between idiosyncratic volatility and returns. Lastly, the maximum return effect holds when we control for skewness. Moreover, skewness is on its own negatively related to returns in our sample, as several asset pricing models predict.

We investigate the impact of universal banks on the performance and the risk of affiliated companies in an unregulated environment with booming financial markets.For a unique sample of 129 Belgian companies listed in the period 1905-1909, we find that universal bank affiliation had a positive impact on the market-to-book ratio and return-on-assets. The effect on performance was positively related to the degree of bank involvement. Universal banks significantly reduced the volatility of return-onassets. Stock return performance, measured by the Sharpe ratio, was also significantly better for affiliated corporations.

Core business and financial market risks are not easily reduced by standard operating procedures in insurance companies. Derivatives theoretically provide a cost effective vehicle to hedge these risks. This paper provides an empirical analysis of the determinants of derivative usage as well as the extent of derivative usage in the Australian insurance industry in both life and general insurance companies for the period 1997-1999.Empirical results for the Australian life insurance industry in general confirm the findings of UK and US based research. However, the Australian general insurance industry does not appear to follow the conclusions of previous literature. Our results indicate that for life insurers, the determinants of derivative usage were size, leverage and reinsurance. For the general insurance industry the determinants were size and the extent of long tail lines of business written. As regards the determinants of the extent of derivative usage, these were size and asset-liability duration mismatches for life insurers. For the general insurance industry the determinants of the extent of derivative usage were size, the extent of long tail lines of business written, and the reporting year.