IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Ex-post Equity Risk Premiums and Economic Cycles in Colombia: An Empirical Research Using Kalman and Hodrick-Prescott Filters

Listed author(s):
  • Andrés Mauricio Gómez Sánchez

    ()

  • José Gabriel Astaiza Gómez

    ()

Registered author(s):

    ABSTRACT This article investigates the relationship between ex-post Equity Risk Premium (ERP) on the Colombian stock market and the economic cycles observed in the country using methodologies based on the Hodrick-Prescott and Kalman filters. Accordingly, a short-term econometric model is put forward for each filter, incorporating monthly data from 2008 to 2014. This reveals better adjustments in the case of the Kalman filter. Furthermore, the models show that the relationship between variables that reflect economic activity and ERP are counter-cyclical but not simultaneous, with a lag of up to two periods.******Este artículo pretende indagar por la relación existente entre la prima por riesgo ex post (ERP) del mercado accionario colombiano y los ciclos económicos observados para este país, a través de las metodologías del filtro mecánico de Hodrick-Prescott y el filtro de Kalman. Así, se plantea un modelo econométrico a corto plazo para cada uno de los filtros, con información mensual desde 2008 a 2014, lo que permite evidenciar mejores ajustes en el caso Kalman. Los modelos muestran que la relación entre las variables que capturan la actividad económica y la ERP resultó ser contra cíclica pero no contemporánea, con rezagos de hasta dos periodos.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://editorial.ucatolica.edu.co/ojsucatolica/revistas_ucatolica/index.php/RFYPE/article/view/131/175
    Download Restriction: no

    Article provided by UNIVERSIDAD CATOLICA DE COLOMBIA in its journal REVISTA FINANZAS Y POLÍTICA ECONÓMICA.

    Volume (Year): 7 (2015)
    Issue (Month): 1 (January)
    Pages: 109-129

    as
    in new window

    Handle: RePEc:col:000443:012602
    Contact details of provider:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September.
    2. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-887, September.
    3. Martin Lettau & Sydney C. Ludvigson & Jessica A. Wachter, 2008. "The Declining Equity Premium: What Role Does Macroeconomic Risk Play?," Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1653-1687, July.
    4. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
    5. John Lintner, 1965. "Security Prices, Risk, And Maximal Gains From Diversification," Journal of Finance, American Finance Association, vol. 20(4), pages 587-615, December.
    6. Diego Jara, 2006. "Propuestas Dirigidas A Mejorar La Eficiencia De Los Fondos De Pensiones," BORRADORES DE ECONOMIA 003403, BANCO DE LA REPÚBLICA.
    7. Salomons, Roelof & Grootveld, Henk, 2003. "The equity risk premium: emerging vs. developed markets," Emerging Markets Review, Elsevier, vol. 4(2), pages 121-144, June.
    8. Lustig, Hanno & Verdelhan, Adrien, 2012. "Business cycle variation in the risk-return trade-off," Journal of Monetary Economics, Elsevier, vol. 59(S), pages 35-49.
    9. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
    10. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
    11. Alvaro Montenegro, 2005. "Introducción al filtro Kalman," DOCUMENTOS DE ECONOMÍA 002920, UNIVERSIDAD JAVERIANA - BOGOTÁ.
    12. Mise, Emi & Kim, Tae-Hwan & Newbold, Paul, 2005. "On suboptimality of the Hodrick-Prescott filter at time series endpoints," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 53-67, March.
    13. J. Tobin, 1958. "Liquidity Preference as Behavior Towards Risk," Review of Economic Studies, Oxford University Press, vol. 25(2), pages 65-86.
    14. Ferson, Wayne E & Harvey, Campbell R, 1991. "The Variation of Economic Risk Premiums," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 385-415, April.
    15. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    16. Martha Misas & Enrique López, 1999. "El producto potencial en Colombia: una estimación bajo var estructural," COYUNTURA ECONÓMICA, FEDESARROLLO, September.
    17. Rajnish Mehra, 2003. "The Equity Premium: Why is it a Puzzle?," NBER Working Papers 9512, National Bureau of Economic Research, Inc.
    18. Oscar Martínez A. & Andrés Murcia Pabón, "undated". "Desempeño financiero de los fondos de pensiones obligatorias en Colombia," Temas de Estabilidad Financiera 022, Banco de la Republica de Colombia.
    19. Ferson, Wayne E & Schadt, Rudi W, 1996. " Measuring Fund Strategy and Performance in Changing Economic Conditions," Journal of Finance, American Finance Association, vol. 51(2), pages 425-461, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:col:000443:012602. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joan M. Tejedor E.)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.