Is value premium a proxy for time-varying investment opportunities
Subtitle: some time series evidence
By: by Hui Guo ... [et al].
Contributors: Guo, Hui.; Federal Reserve Bank of St. Louis.
Series: Working paper ;; 2005-026A; Working paper (Federal Reserve Bank of St. Louis : Online) ;; 2005-026A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2005
Place of publication: [St. Louis, Mo.]
Language: eng
Format: Electronic resource
Subjects: Capital assets pricing model.; Stocks -- Rate of return.
Description: "Campbell and Vuolteenaho (2004) and Brennan, Wang, and Xia (2004) recently argue that the value premium co-moves with investment opportunities and thus reflects rational pricing.  This paper extends their analysis by showing that the ICAPM interpretation of the value premium also sheds light on the puzzling empirical relation between the stock market risk and return across time.  That is, in contrast with many early authors, it is found to be positive and highly significant after controlling for the covariance between the stock market return and the value premium.  Moreover, we also document a positive and significant relation between the value premium and its conditional variance over the post-1963 period.  Our results, which appear to be robust using both the realized volatility model and the GARCH model, confirm that the value premium cannot be completely attributed to data mining and irrational pricing"--Federal Reserve Bank of St. Louis web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 7/22/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.