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An Intertemporal CAPM with stochastic volatility

Campbell, John Y., Giglio, Stefano, Polk, Christopher 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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Identification Number: 10.1016/j.jfineco.2018.02.011


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:
Additional Information: © 2017 Elsevier
Divisions: Personal Social Services Research Unit
Subjects: H Social Sciences > HG Finance
Date Deposited: 02 Mar 2017 15:53
Last Modified: 20 Oct 2021 01:21

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