When we allow heteroskedastic asset returns in Campbell’s (1993) ICAPM, the investment opportunity set is charaterized by the stock market return and the stock market volatility. We show that the model provides a good risk-based explanation for the size, momentum, and liquidity factors as well as the aggregate volatility factors. Both the time-series studies and the cross-sectional studies support the idea.
Keywords: Cross-Section of Equity Returns, GARCH-MIDAS, VAR, ICAPM, Linear Factor Pricing Model
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[2014년 제 1차] Stock Market Volatility and Trading Strategy Based
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2014-02-24