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

Jan Antell; Mika Vaihekoski

doi:10.1016/j.ribaf.2023.102017

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

Jan Antell
, Mika Vaihekoski

Finansiell ekonomi, Helsingfors

University of Turku

Forskningsoutput: Tidskriftsbidrag › Artikel › Vetenskaplig › Peer review

Sammanfattning

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.

Originalspråk	Engelska
Artikelnummer	102017
Referentgranskad vetenskaplig tidskrift	Research in International Business and Finance
Volym	66
Antal sidor	17
ISSN	0275-5319
DOI	https://doi.org/10.1016/j.ribaf.2023.102017
Status	Publicerad - 15.06.2023
MoE-publikationstyp	A1 Originalartikel i en vetenskaplig tidskrift

Nyckelord

512 Företagsekonomi

Åtkomst av dokument

10.1016/j.ribaf.2023.102017Licens: CC BY

1-s2.0-S0275531923001435-mainPublicerad version, 1,74 MBLicens: CC BY

OpenUrl-tillgänglighet

Fulltext

Andra filer och länkar

Link to publication in Scopus

Citera det här

@article{ecb40729b5f8435c90b5df18ab873162,

title = "Countercyclical and time-varying reward to risk and the equity premium",

abstract = "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.",

keywords = "512 Business and Management, conditional asset pricing, equity premium, reward to risk, market risk, business cycles",

author = "Jan Antell and Mika Vaihekoski",

note = "Publisher Copyright: {\textcopyright} 2023 The Author(s)",

year = "2023",

month = jun,

day = "15",

doi = "10.1016/j.ribaf.2023.102017",

language = "English",

volume = "66",

journal = "Research in International Business and Finance",

issn = "0275-5319",

publisher = "Elsevier",

}

TY - JOUR

T1 - Countercyclical and time-varying reward to risk and the equity premium

AU - Antell, Jan

AU - Vaihekoski, Mika

PY - 2023/6/15

Y1 - 2023/6/15

N2 - 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.

AB - 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.

KW - 512 Business and Management

KW - conditional asset pricing

KW - equity premium

KW - reward to risk

KW - market risk

KW - business cycles

UR - https://www.scopus.com/pages/publications/85162115690

U2 - 10.1016/j.ribaf.2023.102017

DO - 10.1016/j.ribaf.2023.102017

M3 - Article

SN - 0275-5319

VL - 66

JO - Research in International Business and Finance

JF - Research in International Business and Finance

M1 - 102017

ER -

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

Sammanfattning

Nyckelord

Åtkomst av dokument

OpenUrl-tillgänglighet

Andra filer och länkar

Fingeravtryck

Citera det här