Can we invest on the basis of equity risk premia and risk factors from multi-factor models?

2016 ◽  
Vol 2 (16) (3) ◽  
pp. 78-98
Author(s):  
Paweł Sakowski ◽  
Robert Ślepaczuk ◽  
Mateusz Wywiał
Keyword(s):  
Risk Factors ◽  
Risk Premia ◽  
Factor Models ◽  
Equity Risk

Disappointment, Pessimism and the Equity Risk Premia

2002 ◽  
Author(s):  
Thierry Chauveau ◽  
Nicolas Nalpas
Keyword(s):  
Risk Premia ◽  
Equity Risk

scholarly journals Exchange Rates and Liquidity Risk

2020 ◽  
Vol 11 (2) ◽  
pp. 159
Author(s):  
Martin D.D. EVANS
Keyword(s):  
Risk Factors ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Liquidity Risk ◽  
Risk Premia ◽  
Time Varying ◽  
Foreign Exchange Risk ◽  
Exchange Risk

I use Forex trading data to study how risks associated with the lack of liquidity contribute to the dynamics of 17 spot exchange rates through their time-varying contributions to risk premia. I find that liquidity risk matters. All the foreign exchange risk premia compensate investors for exposure to liquidity risk; and, for many currencies, exposure to liquidity risk appears to be more important than exposure to the traditional carry and momentum risk factors. I also find that variations in the price of liquidity risk make economically important contributions to the behavior of individual foreign currency returns: they account for approximately 34%, on average, of the variability in currency returns compared to the contribution of approximately 8% from the prices of carry and momentum risk.

scholarly journals Tests of risk premia in linear factor models

2009 ◽  
Vol 149 (2) ◽  
pp. 149-173 ◽  
Author(s):  
Frank Kleibergen
Keyword(s):  
Risk Premia ◽  
Factor Models ◽  
Linear Factor

scholarly journals Nuclear Hazard and Asset Prices: Implications of Nuclear Disasters in the Cross-Sectional Behavior of Stock Returns

2020 ◽  
Vol 12 (22) ◽  
pp. 9721
Author(s):  
Ana Belén Alonso-Conde ◽  
Javier Rojo-Suárez
Keyword(s):  
Stock Returns ◽  
Factor Model ◽  
Large Fraction ◽  
Factor Models ◽  
Cross Sectional ◽  
Risk Premiums ◽  
Conditional Capm ◽  
Equity Risk ◽  
The Cross ◽  
The Cost

Using stock return data for the Japanese equity market, for the period from July 1983 to June 2018, we analyze the effect of major nuclear disasters worldwide on Japanese discount rates. For that purpose, we compare the performance of the capital asset pricing model (CAPM) conditional on the event of nuclear disasters with that of the classic CAPM and the Fama–French three- and five-factor models. In order to control for nuclear disasters, we use an instrument that allows us to parameterize the linear stochastic discount factor of the conditional CAPM and transform the classic CAPM into a three-factor model. In this regard, the use of nuclear disasters as an explanatory variable for the cross-sectional behavior of stock returns is a novel contribution of this research. Our results suggest that nuclear disasters account for a large fraction of the variation of stock returns, allowing the CAPM to perform similarly to the Fama–French three- and five-factor models. Furthermore, our results show that, in general, nuclear disasters are positively related to the expected returns of a large number of assets under study. Our results have important implications for the task of estimating the cost of equity and constitute a step forward in understanding the relationship between equity risk premiums and nuclear disasters.

Sign in / Sign up

Export Citation Format

Share Document