Unrealized return dispersion and the equity risk premium

Kenan Qiao, Zhehan Ji and Haibin Xie

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: This paper discusses how unrealized return dispersion across individuals affects the equity risk premium. We specify an intertemporal capital asset pricing model with heterogeneous preferences depending on investors’ unrealized returns and uncover that unrealized return dispersion negatively predicts the equity risk premium. An empirical study is performed on the Chinese stock market, and the results are consistent with the theoretical claims.

Keywords: Disposition effect; Unrealized return dispersion; Equity risk premium (search for similar items in EconPapers)
JEL-codes: G12 G41 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006888

DOI: 10.1016/j.frl.2023.104316

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