Faculty Digital Archive

Archive@NYU >
Stern School of Business >
Salomon Center >
Asset Management  >

Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/27415

Title: Risk and Return: Some New Evidence
Authors: Guo, Hui
Whitelaw, Robert
Issue Date: Oct-2000
Series/Report no.: S-AM-00-05
Abstract: We develop a structural asset pricing model to investigate the relationship between stock market risk and return. The structural model is estimated using the conditional market variance implied by S&P 100 index option prices. Relative risk aversion is precisely identified and is found to be positive, with point estimates ranging from 3.06 to 4.01. However, the implied volatility data only spans the period November 1983 to May 1995. As a robustness check, the structural model is also examined with postwar monthly data, in which the conditional market variance is estimated. We again find a positive and significant risk-return relation and get similar point estimates for relative risk aversion. Additionally, we document some facts about stock market return. First, stock price movements are primarily driven by changes in investment opportunities, not by changes in market volatility. Second, there is some evidence of a leverage effect. Third, relative risk aversion is quite stable over time.
URI: http://hdl.handle.net/2451/27415
Appears in Collections:Asset Management

Files in This Item:

File Description SizeFormat
S-AM-00-05.pdf348.96 kBAdobe PDFView/Open

Items in Faculty Digital Archive are protected by copyright, with all rights reserved, unless otherwise indicated.


The contents of the FDA may be subject to copyright, be offered under a Creative Commons license, or be in the public domain.
Please check items for rights statements. For information about NYU’s copyright policy, see http://www.nyu.edu/footer/copyright-and-fair-use.html 
Valid XHTML 1.0 | CSS