Dynamic Network Risk

Jozef Baruník and Michael Ellington

Papers from arXiv.org

Abstract: This paper examines the pricing of short-term and long-term dynamic network risk in the cross-section of stock returns. Stocks with high sensitivities to dynamic network risk earn lower returns. We rationalize our finding with economic theory that allows the stochastic discount factor to load on network risk through the precautionary savings channel. A one-standard deviation increase in long-term (short-term) network risk loadings associate with a 7.66% (6.71%) drop in annualized expected returns.

Date: 2020-06, Revised 2020-07
New Economics Papers: this item is included in nep-net and nep-rmg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2006.04639

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