On the Impacts of Crisis on the Risk Premium: Evidence from the US Stock Market using a Conditional CAPM

Mohamed Arouri and Fredj Jawadi

Economics Bulletin, 2010, vol. 30, issue 2, 1032-1043

Abstract: This article investigates the evolution of the US risk premium in periods of crisis. First, we estimate a conditional CAPM with time-varying systematic risk and price of risk using a multivariate GARCH-in-Mean model. Second, we study the structural breaks in the risk premium we obtain. Finally, we relate our results to important facts and economic events. Our findings show that the US risk premium increased significantly during periods of crisis and that the last 2007-2009 financial crisis has had the largest impact.

Keywords: US Risk Premium; CAPM; Multivariate GARCH; Structural Breaks (search for similar items in EconPapers)
JEL-codes: F3 G1 (search for similar items in EconPapers)
Date: 2010-04-21
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Citations: View citations in EconPapers (2)

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Working Paper: On the Impacts of Crisis on the Risk Premium: Evidence from the US Stock Market using a Conditional CAPM (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-09-00810

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