A key criticism of the existing empirical literature on the risk-return relation relates to the relatively small amount …, measures of conditional mean and conditional volatility--and ultimately the risk-return relation itself--will be misspecified … that three new factors, a "volatility," "risk premium," and "real" factor, contain important information about one …

This paper proposes a dynamic risk-based model that captures the high expected returns on value stocks relative to …, but that shocks to the time-varying price of risk are not. As long-horizon equity, growth stocks covary more with this … time-varying price of risk than value stocks, which covary more with shocks to cash flows. When the model is calibrated to …

There is an ongoing debate in the literature about the apparent weak or negative relation between risk (conditional … expected returns--the risk component and the component due to the desire to hedge changes in investment opportunities. We also … increase estimation efficiency. As a result, the coefficient of relative risk aversion is estimated more precisely, and we find …

between the maximum daily return over the past one month (MAX) and expected stock returns. Average raw and risk …

of the other variables. Our relations are useful for understanding the risk-return trade-off, as well as characterizing …

loadings on value and small-cap risk factors than stocks with a low risk of failure. These patterns hold in all size quintiles … are compensation for the risk of financial distress …

with empirical evidence, the model shows that (a) value stocks are those with higher cash-flow risk; (b) the size of the … value premium is larger in "bad times," due to time variation in risk preferences; (c) the unconditional CAPM fails, because …

dividend yield is typically viewed as a reflection of either changing risk, related to the business cycle, or irrational … risk as well as expected return, we develop Bayesian methods to examine the interaction between the data and an investor … and a riskless asset. In general, however, the simple risk/return model of Merton (1980) explains very little of the yield …

Swiss franc assets, together with the US stock market. The model is estimated constraining risk premia to depend on the time … variances cannot explain the observed time-variation of risk premia. Furthermore, the constraints imposed by the static CAPH are …