This paper tests the hypothesis that the market portfolio in European equity returns is a dynamic factor in the sense that individual stock return volatilities and risk premia are driven by the dynamics of a common dynamic factor namely, the market portfolio. Support for the hypothesis would...

The world of finance has been revolutionized in the last twenty years by factors such as the liberalization and subsequent integration of global financial markets and the advances in computing and communications technology. Thsee important changes have led to a stream of financial innovations...