In this paper, we employ a combination of the jump diffusion and GARCH model in the mean equation to test the risk …-return relationship in the U.S. stock returns. The results suggest a statistically significant relationship between the risk and the … return if the risk measure includes components of smoothly changing variance and jump events. These results are not …

demonstrate that the high-risk aversion value observed by Mehra and Prescott may be attributable to the problem of fitting a … large equity risk premium and thereby explains the puzzle …

The results suggest that the beta systematic risk measure calculated with the well-known single index market model … (SIMM) may be a random coefficient. This would explain why the average NYSE stock has less than half of its total risk … explained by market forces — the true beta is moving randomly while the OLS beta is a point estimate which is invariant over the …