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Sources of systematic risk

Makarov, Igor and Papanikolaou, D. (2008) Sources of systematic risk. Working paper series. Social Science Electronic Publishing.

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Abstract

Using the restrictions implied by the heteroskedasticity of stock returns, we identify four factors in the U.S. industry returns. The first correlates highly with the market portfolio; the second is a portfolio of stocks that produce investment goods minus stocks that produce consumption goods; the third differentiates between cyclical and noncyclical stocks. The fourth, a portfolio of industries that produce input goods minus the rest of the market, is a robust predictor of excess returns on the market portfolio and bond returns. The extracted factors are shown to contain significant information about future macroeconomic and financial variables.

Item Type: Monograph (Working Paper)
Official URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id...
Additional Information: © 2008 The Authors
Divisions: Finance
Subjects: H Social Sciences > HG Finance
Sets: Departments > Finance
Date Deposited: 30 Oct 2013 11:54
Last Modified: 15 May 2020 23:27
URI: http://eprints.lse.ac.uk/id/eprint/53906

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