Intertemporal Market Risks and the Cross–Section of Greek Average Returns

Michail Koubouros and Ekaterini Panopoulou
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Michail Koubouros: Michail Koubouros, Department of Economics, University of Peloponnese and Management School, University of Liverpool, Terma Karaiskaki, 221 00 Tripolis, Greece. E–mail: m.koubouros@uop.gr

Journal of Emerging Market Finance, 2007, vol. 6, issue 2, 203-227

Abstract: This article examines whether the overall market risk, along with risks reflecting uncertainty related to the long–run dynamics of market cash flows (dividends) and discount rates (returns), price average returns on single–sorted portfolios in the Greek stock market. Our results suggest that a two–beta intertemporal capital asset pricing model explains half of the cross–sectional variation in average returns and delivers an economically and statistically acceptable estimate of the coefficient of relative risk aversion. Despite the relative importance of market discount–rate risk, it is market dividend–growth risk that turns out to be far more significant in determining average returns on Greek portfolios.

Keywords: JEL Classification: G11; JEL Classification: G12; JEL Classification: G14; CAPM; beta; cash flow risk; discount rate risk; risk aversion (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:6:y:2007:i:2:p:203-227

DOI: 10.1177/097265270700600204

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