structure. Our sample comprises 706 European firms from France, Germany, Italy and the U.K. over the period from 1983 to 2002 … interest rates are low and the risk of disruptions in the global financial system are negligible. We also document that capital …

are a function of risk-free rates and a bank-specific risk premium. Cost of equity estimates declined steadily across all … countries from 1990 to 2005 but then rose from 2006 onwards. The fall in the cost of equity reflects (i) the decrease in risk …-free rates over this period, and (ii) a decline in the sensitivity of bank stock returns to market risk (the CAPM beta) in all …

in risk premia; or the irrational exuberance of investors, bidding prices up and down even in the absence of changes in … such changes in uncertainty would generate through sentiments or risk premia. I then apply this framework to the S&P 500 …, the negative correlation between movements in uncertainty and in implied risk premia) is not compatible with rational …

priced risk factor and differentiation between specific and common uncertainty important. Our results are robust across …