Periodic returns are widely used to estimate expected return when testing the CAPM. We show that in the original one-period CAPM, the linear relationship between beta and the expected periodic return is obtained only by adjusting the expected continuously compounded return, and the linearity is...

Inspired by Aumann and Serrano (2008) and Foster and Hart (2009), we propose risk-neutral options' implied measures of riskiness and investigate their significance in predicting the cross section of expected returns per unit of risk. The empirical analyses indicate a negative and significant...

We introduce a new meaure of risk appetite in financial markets, based on the cross sectional behavior of excess returns. Turning them into probabilities through a Markov Switching model, we define one global risk appetite measure as the cross-sectional average of the individual probabilities...