Expected Returns, Time-Varying Risk, and Risk Premia
AbstractA new empirical model for intertemporal capital asset pricing is presented that allows both time-varying risk premia and betas where the latter are identified from the dynamics of the conditional covariance of returns. The model is more successful in explaining the predictable variations in excess returns when the returns on the stock market and corporate bonds are included as risk factors than when the stock market is the single factor. Although changes in the covariance of returns induce variations in the betas, most of the predictable movements in returns are attributed to changes in the risk premia. Copyright 1994 by American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal Journal of Finance.
Volume (Year): 49 (1994)
Issue (Month): 2 (June)
Other versions of this item:
- Martin D. Evans, 1992. "Expected Returns, Time-Varying Risk and Risk Premia," Working Papers 92-14, New York University, Leonard N. Stern School of Business, Department of Economics.
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- Ram Bhar & Carl Chiarella & Wolfgang Runggaldier, 2001. "Filtering Equity Risk Premia From Derivative Prices," Research Paper Series 69, Quantitative Finance Research Centre, University of Technology, Sydney.
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- Viviana Fernández, 2001. "A Liquidity Premium Puzzle?: Evidence from Chile," Documentos de Trabajo 105, Centro de Economía Aplicada, Universidad de Chile.
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