C-CAPM Refinements and the Cross-Section of Returns

The stable long-run CAPM and the cross-section of expected returns

The discussion papers published in this series represent the authors' personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank. Reproduction permitted only if source is stated. ISBN 3–935821–02–6 The capital-asset-pricing model (CAPM) is one of the most popular methods of financial market analysis. But, evidence of the poor empirical performance of the CAPM has accu...

CAPM, Components of Beta and the Cross Section of Expected

Le CIRANO collabore avec de nombreux centres et chaires de recherche universitaires dont on peut consulter la liste sur son site web. Les cahiers de la série scientifique (CS) visent à rendre accessibles des résultats de recherche effectuée au CIRANO afin de susciter échanges et commentaires. Ces cahiers sont écrits dans le style des publications scientifiques. Les idées et les opinions émises ...

The Cross - Section of Stock Returns :

Inflation Risk and the Cross Section of Stock Returns

I establish that inflation risk is priced in the cross section of stock returns: Stocks that have low returns during inflationary times command a risk premium. I estimate a market price of inflation risk that is comparable in magnitude to the price of risk for the aggregate market. Inflation is therefore a key determinant of risk in the cross section of stocks. The inflation premium cannot be e...

Capital, Contracts and the Cross Section of Stock Returns∗

We present a tractable, static, general equilibrium model with multiple sectors in which firms offer workers incentive contracts and simultaneously raise capital in stock markets. Workers optimally invest in the stock market and at the same time hedge labor income risk. Firms rationally take agents’ portfolio decisions into account. In equilibrium, the cost of capital of each sector is endogeno...