|
|
|
|
||||
|
||||
Investor Expectations, Business Conditions, and the Pricing of Beta-Instability RiskWilliam N. GoetzmannYale School of Management - International Center for Finance; National Bureau of Economic Research (NBER) Akiko WatanabeUniversity of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis Masahiro WatanabeUniversity of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis January 21, 2009 AFA 2009 San Francisco Meetings Paper EFA 2007 Ljubljana Meetings Paper Yale ICF Working Paper Abstract: This paper examines the pricing implications of time-variation in assets' market betas over the business cycle in a conditional CAPM framework. We use a half century of real GDP growth expectations from economists' surveys to determine forecasted economic states. This approach largely avoids the confounding effects of econometric forecasting model error. The expectation measure forecasts the market return controlling for existing predictive variables. The loadings on the expectation measure explain a significant fraction of cross-sectional variation in stock returns. A fully tradable, ex ante mimicking portfolio generates positive risk-adjusted returns during good economic times over four decades.
Number of Pages in PDF File: 56 Keywords: conditional CAPM, beta-instability risk, value and growth betas, time-varying premium, business cycle, Livingston Survey, investor expectations JEL Classification: G12 working papers seriesDate posted: March 25, 2008 ; Last revised: January 27, 2013Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo6 in 0.578 seconds
