Risk, Uncertainty, and Expected Returns

By Turan G. Bali, Hao Zhou. Journal of Financial and Quantitative Analysis, 2011

146 citations recorded by the source corpus.

Abstract A conditional asset pricing model with risk and uncertainty implies that the time-varying exposures of equity portfolios to the market and uncertainty factors carry positive risk premia. The empirical results from the size, book-to-market, momentum, and industry portfolios indicate that the conditional covariances of equity portfolios with market and uncertainty predict the time-series and cross-sectional variation in stock returns. We find that equity portfolios that are highly correlated with economic uncertainty proxied by the variance risk premium (VRP) carry a significant annualized 8% premium relative to portfolios that are minimally correlated with VRP.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/23a3ccf1f334e9d3674b986b368f4a90e1518fa8

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Turan G. Bali
2. M. O. Caglayan
3. Stephen J. Brown
4. Lai Xu
5. V. Todorov
6. Tim Bollerslev

In Economics and Econometrics

1. V. Todorov
2. Turan G. Bali
3. Tim Bollerslev
4. M. O. Caglayan
5. Stephen J. Brown
6. Lai Xu
7. Torben G. Andersen
8. George Tauchen

In Finance

1. V. Todorov
2. Tim Bollerslev
3. Turan G. Bali
4. Lai Xu
5. M. O. Caglayan
6. Stephen J. Brown
7. Hao Zhou
8. Torben G. Andersen

Citations in the corpus

• Tail risk premia and return predictability (2014, background): “5 Recent studies corroborating and extending the predictability results in Bollerslev, Tauchen, and Zhou (2009) include Drechsler and Yaron (2011), Han and Zhou (2011), Du and Kapadia (2012), Eraker and Wang (2015), Almeida, Vicente, and Guillen (2013), Bekaert and Hoerova (2014), Bali and Zhou (201”
• Macroeconomic Risk and Hedge Fund Returns (2014, background): “Other studies (e.g., Bloom, Bond, and Van Reenen, 2007; Bloom, 2009; Chen, 2010; Stock and Watson, 2012; Allen, Bali, and Tang, 2012; Bali and Zhou, 2013) provide theoretical and empirical evidence that macroeconomic uncertainty is a relevant state variable proxying for consumption and investment op”