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
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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 |
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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: | 12 Oct 2024 07:18 |
URI: | http://eprints.lse.ac.uk/id/eprint/69634 |
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