Author : David Bellamy
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Book Synopsis An Examination of Variation in the Equity Market Risk Premium by : David Bellamy
Download or read book An Examination of Variation in the Equity Market Risk Premium written by David Bellamy and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper focuses on the time changing nature of the Australian equity market risk premium. The literature identifies a set of explanatory variables including yield curve slope, interest rate level, dividend yield and two measures of return volatility which may explain how the risk premium in equity market returns changes over time. A GARCH-M model using daily Australian is used in statistical tests. Volatility variables exhibit some explanatory power over the equity premium though this appears isolated to the post-crash period. The remaining explanatory variables provide little significant explanatory power. The model of time changing variance includes a GARCH process and an exogenous variable, implied volatility, which are statistically significant and of the expected sign. This is consistent with the possibility that these two sources of volatility predictions are useful in explaining changes in the variance of the equity risk premium.