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Article: Is there a positive relationship between stock market volatility and the equity premium?
- Article from:
- Journal of Money, Credit & Banking
- Article date:
- June 1, 2004
- Author:
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To the extent that aggregate risk in the stock market is captured by the conditional variance of the return on a market portfolio, it seems reasonable to expect a positive empirical relationship between market volatility and the equity premium. (1) Studies by French, Schwert, and Stambaugh (1987), Bollerslev, Engle, and Wooldrige (1988), Turner, Startz, and Nelson (1989), Harvey (1989), Campbell and Hentschel (1992), Scruggs (1998), and Veronesi (1999) find some support for a positive relationship. However, other studies by Campbell (1987), Breen, Glosten, and Jagannathan (1989), Nelson (1991), Glosten, Jagannathan, and Runkle (1993), and Whitelaw (1994) find otherwise.
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