Political uncertainty drives markets. Among macroeconomic forces, it is one of the fewfactors that systematically affect most assets - hence it qualifies as a state variable in the senseof the ICAPM and should carry a risk premium. We employ static and conditional factormodels using data in...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

While existing asset pricing studies focus on macroeconomic variables to predict stock market risk premium, we find that an aggregate index of corporate activities has substantially greater predictive power both in- and out-of sample, and yields much greater economic gain for a mean-variance...

This paper finds that a zero-investment strategy that goes long (short) in the highest (lowest) quintiles of firm-specific risk earns overall positive excess returns across twenty-one emerging markets. Interestingly, in previous studies such returns were found to be negative for the US and...

Purpose This study aims to investigate the market timing strategy in different market conditions (i.e. up, down, normal and in-financial-crisis situation) in the emerging market of Pakistan over the period 1995 to 2015. Furthermore, this study tests the validity of the capital asset pricing...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

We employ the generalized forecast error variance decomposition based on the vector autoregression model to investigate factors' volatility spillovers. Furthermore, we investigate the relationship between factor volatility spillovers and their premia via the portfolio analysis. We find: (1)...

This paper assesses the estimation of the so-called equity risk premium, i.e. the expected return on equities in excess of the risk-free rate, using the dividend discount model as the organizing framework. I compare the equity risk premium estimates from different dividend discount models in...

Most long-run empirical research on the historical risk premium has focused on the experience of the United States. However, the United States has been a remarkably successful economy, making it unlikely that the US risk premium is representative. Until recently, evidence on the risk premium in...

This paper offers a novel framework for understanding the equilibrium price of risk. Notably, it illustrates the CAPM fails under its own exact assumptions when the fair price of total risk is not (ex ante) linear. A linear Security Market Line then nevertheless remains, yet consistent with...