Campbell, John Y., Giglio, Stefano, Polk, Christopher 
ORCID: 0009-0008-0133-6709 and Turley, Robert
(2018)
An Intertemporal CAPM with stochastic volatility.
Journal of Financial Economics, 128 (2).
pp. 207-233.
ISSN 0304-405X
|
Text
- Accepted Version
Download (531kB) | Preview |
Abstract
This paper studies the pricing of volatility risk using the Örst-order conditions of a long-term equity investor who is content to hold the aggregate equity market rather than overweighting value stocks and other equity portfolios that are attractive to short-term investors. We show that a conservative long-term investor will avoid such overweights in order to hedge against two types of deterioration in investment opportunities: declining expected stock returns, and increasing volatility. Empirically, we present novel evidence that low-frequency movements in equity volatility, tied to the default spread, are priced in the cross-section of stock returns.
| Item Type: | Article |
|---|---|
| Official URL: | https://www.journals.elsevier.com/journal-of-finan... |
| Additional Information: | © 2017 Elsevier |
| Divisions: | Care Policy and Evaluation Centre Finance |
| Subjects: | H Social Sciences > HG Finance |
| Date Deposited: | 02 Mar 2017 15:53 |
| Last Modified: | 11 Dec 2024 21:29 |
| URI: | http://eprints.lse.ac.uk/id/eprint/69634 |
Actions (login required)
 |
View Item |
Download Statistics
Download Statistics