Is idiosyncratic risk conditionally priced?
نویسندگان
چکیده
In Merton (1987), idiosyncratic risk is priced in equilibrium as a consequence of incomplete diversification. We modify his model to allow the degree diversification vary with average volatility. This simple recognition results state‐dependent premium that higher when volatility low, and vice versa. The data appear be consistent positive for both US other developed markets.
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ژورنال
عنوان ژورنال: Quantitative Economics
سال: 2021
ISSN: ['1759-7331', '1759-7323']
DOI: https://doi.org/10.3982/qe1528