Economics at your fingertips  

An intertemporal CAPM with stochastic volatility

John Campbell (), Stefano Giglio (), Christopher Polk and Robert Turley

Journal of Financial Economics, 2018, vol. 128, issue 2, 207-233

Abstract: This paper studies the pricing of volatility risk using the first-order conditions of a long-term equity investor who is content to hold the aggregate equity market instead of overweighting value stocks and other equity portfolios that are attractive to short-term investors. We show that a conservative long-term investor will avoid such overweights to hedge against two types of deterioration in investment opportunities: declining expected stock returns and increasing volatility. We present novel evidence that low-frequency movements in equity volatility, tied to the default spread, are priced in the cross section of stock returns.

JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: An Intertemporal CAPM with stochastic volatility (2018) Downloads
Working Paper: An Intertemporal CAPM with Stochastic Volatility (2015) Downloads
Working Paper: An Intertemporal CAPM with Stochastic Volatility (2012) Downloads
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:

DOI: 10.1016/j.jfineco.2018.02.011

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-09-16
Handle: RePEc:eee:jfinec:v:128:y:2018:i:2:p:207-233