Skip Navigation

This Article
Right arrow Full Text (PDF)
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Similar articles in ISI Web of Science
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (15)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Whitelaw, R. F.
Right arrow Search for Related Content
Related Collections
Right arrow G12 - Asset Pricing; Trading volume; Bond Interest Rates
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

Rev Fin 2000; 13:521-547
© 2000 the Society for Financial Studies

Article

Stock market risk and return: an equilibrium approach

RF Whitelaw
New York University, Stern School of Business, 44 West 4th Street, Suite 9-190, New York, NY 10012, USA
e-mail: rwhitela@stern.nyu.edu

Abstract

Empirical evidence that expected stock returns are weakly related to volatility at the market level appears to contradict the intuition that risk and return are positively related. We investigate this issue in a general equilibrium exchange economy characterized by a regime-switching consumption process with time-varying transition probabilities between regimes. When estimated using consumption data, the model generates a complex, non-linear and time-varying relation between expected returns and volatility, duplicating the salient features of the risk/return trade-off in the data. The results emphasize the importance of time-varying investment opportunities and highlight the perils of relying on intuition from static models.


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?


This article has been cited by other articles:


Home page
 REV FINANC STUDHome page
M. Lettau, S. C. Ludvigson, and J. A. Wachter
The Declining Equity Premium: What Role Does Macroeconomic Risk Play?
Rev. Financ. Stud., July 1, 2008; 21(4): 1653 - 1687.
[Abstract] [Full Text] [PDF]

Home page
 JOURNAL OF FINANCIAL ECONOMETRICSHome page
J. M. Maheu and T. H. McCurdy
Components of Market Risk and Return
J. Financial Econometrics, October 1, 2007; 5(4): 560 - 590.
[Abstract] [Full Text] [PDF]

Home page
 REV FINANC STUDHome page
G. Bekaert and J. Liu
Conditioning Information and Variance Bounds on Pricing Kernels
Rev. Financ. Stud., April 1, 2004; 17(2): 339 - 378.
[Abstract] [Full Text] [PDF]


Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.