Article ID Journal Published Year Pages File Type
10127715 Economics Letters 2018 10 Pages PDF
Abstract
We hypothesize that good (bad) market news causes overpricing (underpricing) in the short-term, thereby inducing a weak or negative (significantly positive) intertemporal risk-return tradeoff. We verify this asymmetry through the indirect relation of a weak or positive association between excess market returns and contemporaneous volatility innovations conditional on good news, and a significantly negative relation conditional on bad news. We also show that the inclusion of a price adjustment term is critical for reliable estimation of the intertemporal risk-return relation.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, ,