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This article describes the five-year implementation of enterprise risk management at Hydro One, a Canadian electric utility in a newly deregulated market. Starting with the creation of the position of Chief Risk Officer and the implementation of a pilot risk study involving one of the firm's subsidiaries, the ERM process has made use of a variety of tools and techniques, including the "Delphi Method," risk trends, risk tolerances, and risk rankings. 2005 Morgan Stanley.

We investigate the market efficiency implications of firm-specific return variation measured by absolute idiosyncratic volatility. We find that the absolute idiosyncratic volatility (the variance of the residual from an asset-pricing model) displays a positive and robust relationship to mispricing, which reflects an increasing role of noise traders. Previous literature has produced similar -or opposing -results. We deepen our understanding of the previous conflicting results by showing that 1) market volatility by itself is associated with mispricing, 2) absolute idiosyncratic volatility is associated with mispricing even when controlling for market volatility, 3) the strength of the association between absolute idiosyncratic volatility and mispricing depends on the level of market volatility, and 4) absolute and relative measures of idiosyncratic volatility have opposing associations with mispricing. Our findings contribute to the existing literature by reconciling the mixed results for the relationship between idiosyncratic volatility and mispricing displayed in the previous literature. JEL classification: G12; G14

This empirical study of the exchange rate exposure management of Danish non‐financial companies shows that decisions on whether or not to financially hedge an exchange rate exposure is affected by the possibility to react to changes in exchange rates by undertaking various forms of real actions (exercising real options) such as to enter new markets, change suppliers, shift production, among others. The results show that the combined interaction of a firm's size, exports, and foreign subsidiaries, as well as the firm's managerial emphasis on flexibility, are important to real options usage. These findings are important to firms in other countries with open economies.

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