Real-Time Risk Pricing Over the Business Cycle: Some Evidence for the UK

21 Pages Posted: 15 Apr 2006

See all articles by Kevin P. Evans

Kevin P. Evans

Cardiff University - Cardiff Business School

Alan E.H. Speight

University of Wales, Swansea

Abstract

The fully-revised data typically utilized in empirical research do not reflect the true information available to financial market participants at the time of their decision-making. This paper uses a new real-time macroeconomic dataset to appraise the relative importance of different vintages of data on economic variables as determinants of UK stock returns using the framework of Arbitrage Pricing Theory. We find that two factors influence expected stock returns, namely unanticipated inflation and economic uncertainty, but only when measured in real-time. Moreover, their pricing influence is only present during phases of the business cycle when their associated risks are at their most prevalent.

Suggested Citation

Evans, Kevin P. and Speight, Alan E.H., Real-Time Risk Pricing Over the Business Cycle: Some Evidence for the UK. Journal of Business Finance & Accounting, Vol. 33, No. 1-2, pp. 263-283, January/March 2006, Available at SSRN: https://ssrn.com/abstract=886397 or http://dx.doi.org/10.1111/j.1468-5957.2006.01356.x

Kevin P. Evans

Cardiff University - Cardiff Business School ( email )

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Alan E.H. Speight (Contact Author)

University of Wales, Swansea ( email )

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