Assessing the Relation between Equity Risk Premium and Macroeconomic Volatilities in the UK

Renatas Kizys () and Peter Spencer

Discussion Papers from Department of Economics, University of York

Abstract: This paper uses the exponential generalised heteroscedasticity model-in-mean (EGARCH- M) to analyse the relationship between the equity risk premium and macroeconomic volatility. This premium depends upon conditional volatility, which is significantly affected by the long bond yield, acting as a proxy for the underlying rate of inflation.

Keywords: Asset pricing; Risk premium; Macroeconomic volatility; Stochastic discount factor model; Multivariate EGARCH-M model (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 G12 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-mac and nep-upt
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:07/13

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