The business cycle and the equity risk premium in real time

Renatas Kizys; C. Pierdzioch

doi:10.1016/j.iref.2010.03.004

The business cycle and the equity risk premium in real time

Renatas Kizys, C. Pierdzioch

Research output: Contribution to journal › Article › peer-review

Abstract

Building on the stochastic discount factor model, we estimated a multivariate exponential GARCH-in-mean model to analyze the link between the business cycle and the equity risk premium in the United States. In order to measure the business cycle, we used revised and realtime monthly data on industrial production for the period from 1965 to 2008. The main result of our empirical analysis is that estimates of the equity risk premium based on real-time macroeconomic data may significantly differ from estimates of the equity risk premium based on revised macroeconomic data.

Original language	English
Pages (from-to)	711-722
Number of pages	12
Journal	International Review of Economics and Finance
Volume	19
Issue number	4
DOIs	https://doi.org/10.1016/j.iref.2010.03.004
Publication status	Published - Oct 2010

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title = "The business cycle and the equity risk premium in real time",

abstract = "Building on the stochastic discount factor model, we estimated a multivariate exponential GARCH-in-mean model to analyze the link between the business cycle and the equity risk premium in the United States. In order to measure the business cycle, we used revised and realtime monthly data on industrial production for the period from 1965 to 2008. The main result of our empirical analysis is that estimates of the equity risk premium based on real-time macroeconomic data may significantly differ from estimates of the equity risk premium based on revised macroeconomic data.",

author = "Renatas Kizys and C. Pierdzioch",

year = "2010",

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doi = "10.1016/j.iref.2010.03.004",

language = "English",

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T1 - The business cycle and the equity risk premium in real time

AU - Kizys, Renatas

AU - Pierdzioch, C.

PY - 2010/10

Y1 - 2010/10

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AB - Building on the stochastic discount factor model, we estimated a multivariate exponential GARCH-in-mean model to analyze the link between the business cycle and the equity risk premium in the United States. In order to measure the business cycle, we used revised and realtime monthly data on industrial production for the period from 1965 to 2008. The main result of our empirical analysis is that estimates of the equity risk premium based on real-time macroeconomic data may significantly differ from estimates of the equity risk premium based on revised macroeconomic data.

U2 - 10.1016/j.iref.2010.03.004

DO - 10.1016/j.iref.2010.03.004

M3 - Article

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VL - 19

SP - 711

EP - 722

JO - International Review of Economics and Finance

JF - International Review of Economics and Finance

IS - 4

ER -

The business cycle and the equity risk premium in real time

Abstract

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