Revisiting the intertemporal risk-return relation: asymmetrical effect of unexpected volatility shocks

Kiseok Nam, Joshua Krausz and Augustine C. Arize

Quantitative Finance, 2014, vol. 14, issue 12, 2193-2203

Abstract: We suggest that an unexpected volatility shock is an important risk factor to induce the intertemporal relation, and the conflicting findings on the relation could be attributable to an omitting variable bias resulting from ignoring the effect of an unexpected volatility shock on the relation. With the effect of an unexpected volatility shock incorporated in estimation, we find a strong positive intertemporal relation for the US monthly excess returns for 1926:12-2008:12. We also find a significant link between the asymmetric mean-reversion and the intertemporal relation in that the quicker reversion of negative returns is attributed to the negative intertemporal relation under a prior negative return shock.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/14697688.2013.783226 (text/html)
Access to full text is restricted to subscribers.

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:taf:quantf:v:14:y:2014:i:12:p:2193-2203

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1080/14697688.2013.783226

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().