On variance bounds for asset price changes

Kevin Lansing

Journal of Financial Markets, 2016, vol. 28, issue C, 132-148

Abstract: In this paper, I consider variance bounds for stock price changes in a general setting that allows for ex-dividend stock prices, risk-averse investors, and exponentially growing dividends. I show that providing investors with more information about future dividends can either increase or decrease the variance of stock price changes, depending on key parameters, namely, those governing the properties of dividends and the stochastic discount factor. This finding contrasts with the results of Engel (2005), who shows that news about future dividends will always decrease the variance of stock price changes in a specialized setting with cum-dividend stock prices and risk-neutral investors.

Keywords: Asset pricing; Excess volatility; Variance bounds; Risk aversion (search for similar items in EconPapers)
JEL-codes: E44 G12 G14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1386418115000427
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:finmar:v:28:y:2016:i:c:p:132-148

DOI: 10.1016/j.finmar.2015.06.002

Access Statistics for this article

Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

More articles in Journal of Financial Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().