Macro Factors and Time-Varying Risk Premia in UK Financial Markets

Research output: Contribution to conferencePaperpeer-review

Abstract

This paper estimates a dynamic asset pricing model that jointly prices excess returns on stocks and government bonds in the UK. This model fits the cross section of test assets on average as well as providing time-varying countercyclical risk premiums. The results indicate that the equity market factor, level and slope of the yield curve are priced in both stock and bond returns. Inflations and the output gap are informative in predicting asset returns at business cycle frequencies. Risk
premiums are found to be substantially higher and more volatile during economic
recessions.
Original languageEnglish
Publication statusAccepted/In press - 15 Feb 2018
EventRoyal Economic Society Conference 2018 -
Duration: 26 Mar 201828 Mar 2018

Conference

ConferenceRoyal Economic Society Conference 2018
Period26/03/1828/03/18

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