Time-varying state variable risk premia in the ICAPM

• 成果类型: Article
• 署名作者: Barroso, Pedro; Boons, Martijn; Karehnke, Paul
• 署名单位: University of New South Wales Sydney; Universidade Nova de Lisboa; Tilburg University; heSam Universite; ESCP Business School
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.07.016
• 发表日期: 2021
• 页码: 428-451
• 关键词: Conditional asset pricing models; State variables; Intertemporal CAPM; Consumption predictability; Time-varying equity risk premia

摘要

We find that the relation between state variables, such as the t-bill rate and term spread, and consumption growth is time-varying. In the cross-section of U.S. stocks, risk premia for exposure to state variables vary over time accordingly. When a state variable predicts consumption strongly relative to its own history, its annualized risk premium increases by 6% (0.4 in Sharpe ratio). This effect implies that risk premia can switch signs and are increasing in the conditional variance of the state variable. These common drivers of time-varying risk premia are consistent with the Intertemporal CAPM. Benchmark factors contain the same conditional expected return effects as state variable risk premia. (C) 2020 Elsevier B.V. All rights reserved.