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Assessing the Relation between Equity Risk Premium and Macroeconomic Volatilities in the UK

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  • Renatas Kizys
  • Peter Spencer

Abstract

This paper uses the exponential generalised heteroscedasticity model-in-mean (EGARCH- M) to analyse the relationship between the equity risk premium and macroeconomic volatility. This premium depends upon conditional volatility, which is significantly affected by the long bond yield, acting as a proxy for the underlying rate of inflation.

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File URL: http://www.york.ac.uk/media/economics/documents/discussionpapers/2007/0713.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of York in its series Discussion Papers with number 07/13.

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Date of creation: Jun 2007
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Handle: RePEc:yor:yorken:07/13

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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
Fax: (0)1904 323759
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Web page: http://www.york.ac.uk/economics/
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Keywords: Asset pricing; Risk premium; Macroeconomic volatility; Stochastic discount factor model; Multivariate EGARCH-M model;

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  2. Shields, KalvInder & Kevin B Grier & Olan T Henry & Nilss Olekalns, 2003. "The Asymmetric Effects of Uncertainty on Inflation and Output Growth," Royal Economic Society Annual Conference 2003, Royal Economic Society 187, Royal Economic Society.
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Cited by:
  1. Marie Brière & Ombretta Signori, 2011. "Inflation hedging portfolios in different regimes," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 139-163 Bank for International Settlements.
  2. Signori, Ombretta & Brière, Marie, 2012. "Inflation-Hedging Portfolios : Economic Regimes Matter," Economics Papers from University Paris Dauphine 123456789/9296, Paris Dauphine University.

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