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.
711-722
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Pierdzioch, Christian
60eb79c6-d98e-4ceb-a634-9acaf7ebc451
October 2010
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), .
(doi:10.1016/j.iref.2010.03.004).
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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Accepted/In Press date: 3 March 2010
e-pub ahead of print date: 20 March 2010
Published date: October 2010
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Local EPrints ID: 434453
URI: http://eprints.soton.ac.uk/id/eprint/434453
ISSN: 1059-0560
PURE UUID: 25a2a0f1-d54c-4056-bf26-a38a5f7b400f
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Date deposited: 24 Sep 2019 16:30
Last modified: 16 Mar 2024 04:41
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Author:
Christian Pierdzioch
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