Short-Term Interest Rates and Stock Market Anomalies

Paulo Maio, Pedro Santa-Clara

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

24 Citeringar (Scopus)

Sammanfattning

We present a simple 2-factor model that helps explain several capital asset pricing model (CAPM) anomalies (value premium, return reversal, equity duration, asset growth, and inventory growth). The model is consistent with Merton’s intertemporal CAPM (ICAPM) framework, and the key risk factor is the innovation on a short-term interest rate, the federal funds rate, or the T-bill rate. This model explains a large fraction of the dispersion in the average returns of the joint market anomalies. Moreover, the model compares favorably with alternative multifactor models widely used in the literature. Hence, short-term interest rates seem to be relevant for explaining several dimensions of cross-sectional equity risk premia.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftJournal of Financial and Quantitative Analysis
Volym52
Utgåva3
Sidor (från-till)927-961
ISSN0022-1090
DOI
StatusPublicerad - 15.06.2017
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

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