An Intertemporal Risk Factor Model

• 成果类型: Article
• 署名作者: Chabi-Yo, Fousseni; Goncalves, Andrei S.; Loudis, Johnathan A.
• 署名单位: University of Massachusetts System; University of Massachusetts Amherst; University System of Ohio; Ohio State University; University of Notre Dame
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.00261
• 发表日期: 2025
• 关键词: ICAPM; factor models; Cross-sectional asset pricing; intertemporal risk; long-term investors

摘要

Prominent factor models are based on tradable factors that do not represent theoretically relevant risks. To address this issue, we develop a factor model that captures the risks to long-term investors present in the intertemporal capital asset pricing model (ICAPM). Empirically, we construct intertemporal risk factors as long-short portfolios based on stock exposures to dividend yield and realized variance. These tradable factors mimic news to long-term expected returns and volatility, and they offset part of the marginal utility increase in recessions induced by wealth declines. Our intertemporal factor model estimation implies significant risk prices that are consistent with the ICAPM restrictions under moderate risk aversion. Moreover, our model performs well relative to previous factor models in terms of its tangency Sharpe ratio and its pricing of key test assets, including single stocks, industry portfolios, and portfolios sorted on risk exposures and lagged anomalies.