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The Monetary Impact on Return Variability and Market Risk Premia

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  • Klemkosky, Robert C.
  • Jun, Kwang W.

Abstract

As an extension of previous works, we develop a theoretical framework for the relationship between monetary changes and market risk premia. The wealth effect and the return variability effect of money are shown to be the two important channels of the monetary impact on the market risk premium for three representative classes of utility functions. The theory also states that the market risk premium will be an increasing function of monetary changes given that the two component effects of money are positive.

Suggested Citation

  • Klemkosky, Robert C. & Jun, Kwang W., 1982. "The Monetary Impact on Return Variability and Market Risk Premia," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(5), pages 663-681, December.
    • Handle: RePEc:cup:jfinqa:v:17:y:1982:i:05:p:663-681_01
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    Cited by:

    1. Shee Q. Wong, 1986. "The Contribution Of Inflation Uncertainty To The Variable Impacts Of Money On Stock Prices," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 9(1), pages 97-101, March.

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