Equity risk premium predictability from cross-sectoral downturns
| Autor: | Faias, José Afonso, Zambrano, Juan Arismendi |
|---|---|
| Přispěvatelé: | Veritati - Repositório Institucional da Universidade Católica Portuguesa |
| Jazyk: | angličtina |
| Rok vydání: | 2022 |
| Předmět: | |
| Zdroj: | Review of Asset Pricing Studies. 12(3):808-842 |
| ISSN: | 2045-9939 2045-9920 |
| DOI: | 10.1093/rapstu/raac001 |
| Popis: | We illustrate the role of left tail dependence—left tail mean (LTM)—in equity risk premium (ERP) predictability. LTM measures the average of pairwise left tail dependency among major equity sectors incorporating shocks imperceptible at the aggregate level. LTM, as well as the variance risk premium, significantly predicts the ERP in and out of sample, which is not the case with commonly used predictors. We find this predictability is the result of procyclical shocks’ reversals in a stable business cycle. This paper contributes to the ongoing debate on ERP predictability. (JEL G10, G12, G14) |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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