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The business cycle and the equity risk premium in real time

The business cycle and the equity risk premium in real time
The business cycle and the equity risk premium in real time
Building on the stochastic discount factor model, we estimated a multivariate exponential GARCH-in-mean model to analyze the link between the business cycle and the equity risk premium in the United States. In order to measure the business cycle, we used revised and realtime monthly data on industrial production for the period from 1965 to 2008. The main result of our empirical analysis is that estimates of the equity risk premium based on real-time macroeconomic data may significantly differ from estimates of the equity risk premium based on revised macroeconomic data.
1059-0560
711-722
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Pierdzioch, Christian
60eb79c6-d98e-4ceb-a634-9acaf7ebc451
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Pierdzioch, Christian
60eb79c6-d98e-4ceb-a634-9acaf7ebc451

Kizys, Renatas and Pierdzioch, Christian (2010) The business cycle and the equity risk premium in real time. International Review of Economics and Finance, 19 (4), 711-722. (doi:10.1016/j.iref.2010.03.004).

Record type: Article

Abstract

Building on the stochastic discount factor model, we estimated a multivariate exponential GARCH-in-mean model to analyze the link between the business cycle and the equity risk premium in the United States. In order to measure the business cycle, we used revised and realtime monthly data on industrial production for the period from 1965 to 2008. The main result of our empirical analysis is that estimates of the equity risk premium based on real-time macroeconomic data may significantly differ from estimates of the equity risk premium based on revised macroeconomic data.

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More information

Accepted/In Press date: 3 March 2010
e-pub ahead of print date: 20 March 2010
Published date: October 2010

Identifiers

Local EPrints ID: 434453
URI: http://eprints.soton.ac.uk/id/eprint/434453
ISSN: 1059-0560
PURE UUID: 25a2a0f1-d54c-4056-bf26-a38a5f7b400f
ORCID for Renatas Kizys: ORCID iD orcid.org/0000-0001-9104-1809

Catalogue record

Date deposited: 24 Sep 2019 16:30
Last modified: 09 Jan 2022 04:07

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Contributors

Author: Renatas Kizys ORCID iD
Author: Christian Pierdzioch

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