The intertemporal relation between expected returns and risk

• 成果类型: Article
• 署名作者: Bali, Turan G.
• 署名单位: City University of New York (CUNY) System; Baruch College (CUNY)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.03.002
• 发表日期: 2008
• 页码: 101-131
• 关键词: ICAPM; conditional capm; conditional covariance; risk aversion; conditional beta; market risk premium; intertemporal hedging demand

摘要

This paper explores the time-series relation between expected returns and risk for a large cross section of industry and size/book-to-market portfolios. I use a bivariate generalized autoregressive conditional heteroskedasticity (GARCH) model to estimate a portfolio's conditional covariance with the market and then test whether the conditional covariance predicts time-variation in the portfolio's expected return. Restricting the slope to be the same across assets, the risk-return coefficient is highly significant with a risk-aversion coefficient (slope) between one and five. The results Lire robust to different portfolio formations, alternative GARCH specifications, additional state variables, and small sample biases. When conditional covariances are replaced by conditional betas, the risk premium on beta is estimated to be in the range of 3% to 5% per annum and is statistically significant. (c) 2007 Elsevier B.V. All rights reserved.