Consumption volatility ambiguity and risk premium’s time-variation

Janis Müller and Peter Posch

Finance Research Letters, 2019, vol. 29, issue C, 336-339

Abstract: In a consumption based asset pricing model one can calculate the volatility of (log-)consumption growth from the expected market return and from the risk-free rate. We propose to use the difference between these estimates to measure ambiguity about consumption volatility. Using a long dataset we show this measure explains up to 69% of post-war variation in the market risk premium.

Keywords: Stochastic volatility; Ambiguity; Time-varying equity premium (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612318301922
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:29:y:2019:i:c:p:336-339

DOI: 10.1016/j.frl.2018.08.016

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().