Naslov (eng)

Excessive equity premium : the curious case of some low-beta portfolios

Autor

Božović, Miloš

Opis (eng)

Abstract: Consumption-based asset pricing can reconcile the high equity premium with the observed correlation between stock returns and consumption growth only if the investors’ risk aversion is extremely high. In this paper, we focus one quity premia of portfolios obtained as univariate sorts of stocks based on their dynamic correlation with the market return. We show that the premia decrease with the size and stability of these dynamic correlations, where as the return volatility and the correlation with consumption growth increase. As a result, the implied risk aversion parameters for portfolios with relatively low and unstable correlations with the market are greater than those obtained for the remaining stocks by a factor of three, These portfolios also have relatively low and unstable betas compared to the rest of the market. Thus, the highest equity premia seem to originate fro portfolios more loosely coupled to systemic risk, which appears counterintuitive. A factor capturing the beta uncertainty premium captures the pattern and produces more reasonable values of the risk aversion parameters.

Jezik

engleski

Datum

2023

Licenca

Ovo delo je licencirano pod uslovima licence
Creative Commons CC BY-NC-ND 4.0 - Creative Commons Autorstvo - Nekomercijalno - Bez prerada 4.0 International License.

http://creativecommons.org/licenses/by-nc-nd/4.0/legalcode

Predmet

Keywords: asset pricing; risk premia; dynamic correlations; beta uncertainty

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o:28218

Ekonomski fakultet