From a large array of economic and financial data series, this paper identifies three fundamental risk dimensions underlying an economy: inflation, real output growth, and financial market volatility. Furthermore, through a no-arbitrage model, the paper links the dynamics and market pricing of...

We exploit the information in the options market to study the variations of return risk and market prices of different sources of risk during the rise and fall of the Nasdaq market. We specify a model that accommodates fluctuations in both risk levels and market prices of different sources of...

The concept of beta as the measure of systematic risk has been widely accepted in the academic and financial community. Increasingly, betas are being used to estimate the cost of capital for corporations. Despite this, however, biases are generally present in ordinary least squares (OLS)...