Balduzzi, Pierluigi; Robotti, Cesare; Balduzzi, Pierluigi; … - 2005
The risk premia assigned to economic (nontraded) risk factors can be decomposed into three parts: (i) the risk premia on maximum-correlation portfolios mimicking the factors; (ii) (minus) the covariance between the nontraded components of the candidate pricing kernel of a given model and the...