Countercyclical and time-varying reward to risk and the equity premium

Jan Antell, Mika Vaihekoski

Research output: Contribution to journalArticleScientificpeer-review


We study whether the equity premium is related to volatility or variance, whether the reward to market risk is positive, and whether it behaves in a counter-cyclical fashion. Using APARCH models for the conditional market risk, we compare the traditional and the new testing approach of Antell and Vaihekoski (2019) on the monthly US equity premium from 1928 to 2018. The results from the new approach give stronger support for the pricing of volatility rather than variance and for positive reward to market risk. The support for time-varying and countercyclical reward to risk is smaller than previously thought.
Original languageEnglish
Article number102017
Peer-reviewed scientific journalResearch in International Business and Finance
Number of pages17
Publication statusPublished - 15.06.2023
MoE publication typeA1 Journal article - refereed


  • 512 Business and Management
  • conditional asset pricing
  • equity premium
  • reward to risk
  • market risk
  • business cycles

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance


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