This thesis consists of four essays in empirical finance. The first two (Chapters 2 and 3) focus on the relationships between international risk-neutral moments, as the ex-ante physical risks indicators, and the future return and realised volatility of the international market proxies, respectively. Moreover, the third (Chapter 4) estimates the relationship between the short-term volatility index and future market volatility. On the other hand, the fourth essay (Chapter 5) discusses the role of Environmental, Social, and Governance (ESG) performances, proxying for sustainability risk, in the relationship between research and development (R&D) intensity and the financial performance of R&D-intensive firms.

Chapter 2 documents risk-neutral moments of returns on 29 country-/region-specific ETFs to provide international uncertainty proxies for as many locations as possible. Our evidence shows these ETFs can generally reflect idiosyncratic information from international markets, but the predictive abilities of risk-neutral moments are heterogeneous among them. The evidence from panel prediction shows that the risk-neutral standard deviation (VOL) can positively predict, but skewness (SKEW) and excess kurtosis (KURT) negatively predict, the future excess returns in time-series analysis. Moreover, results from the post-ranking performance show that the ETFs with low SKEW on average earn an extra 4.55% annualised monthly excess return, compared with those with high SKEW.

Chapter 3 estimates the predictability of future realised volatility on US-listed proxy ETFs for eight stock markets using their risk-neutral variance, skewness, and excess kurtosis. Our evidence shows that the risk-neutral variance and skewness have a positive relationship with future realised volatility, while excess kurtosis has a negative relationship with future realised volatility. Results from various statistical tests for model comparison show that incorporating second and higher-order risk-neutral moments from specific market proxies and aggregated moments among market proxies into the HAR-RV model can improve the predictability of future realised volatility, and higher-order risk-neutral moments can provide extra information and significantly contribute to improve forecasting power and reduce extreme underestimation.

Chapter 4 aims to provide a concise evaluation of the effectiveness of the new index, VIX1D, which reflects short-term market swings, in predicting realised volatility. Similar to VIX, VIX1D exhibits a positive relationship with future realised volatility. When incorporated into HAR-RV, VIX1D demonstrates considerably enhanced predictive capability compared to VIX for one-day ahead predictions, as confirmed by various out-of-sample analyses. Additionally, the predictive capacity of VIX1D diminishes more rapidly compared to that of VIX. These findings validate that short-term swings significantly improve the forecast of short-term realised volatility.

Chapter 5 explores how ESG performances affect the effects of research and development (R&D) intensity on firm performance across G20 nations. We find that when ESG scores and pillar scores are high, the inverse relationships between R&D intensity and both current return on assets (ROA) and expected 3-year abnormal stock returns are weakened. Importantly, active participation in ESG initiatives can potentially offset the negative implications of substantial R&D expenditures on a company's profitability and capital appreciation. Conversely, these scores have a negative impact on the Tobin’s Q value in the subsequent year, stemming from unfavourable short-term market expectations.