Guo, Hui (contributor); Savickas, Robert (contributor) - 2003 - [Elektronische Ressource]
Jensen’s inequality and
k
p is the risk price for factor k, which
is a non-linear function of structural parameters, e ….
Suppose that
t
x is a K-by-1 vector of variables that forecasts real stock market return
,1mt
r
+
.
6
For simplicity, we … assume that x
t+1
and
,1mt
r
+
jointly follow a first-order vector auto-regressive
process:
(1)
,1 ,
01
1
mt mt
t
tt
rr
AA …