Testing the Information Efficiency and Variable Risk Premium in Commercial Property Market

Estimating the market risk premium

This paper provides a method for estimating the market risk premium that accounts for shifts in investment opportunities by explicitly modeling the underlying process governing the level of market volatility. I find that approximately 50% of the measured risk premium is related to the risk of future changes in investment opportunities. Evidence of a structural shift in the underlying volatility...

Forward-Looking Market Risk Premium

A method for computing forward-looking market risk premium is developed in this paper. We first derive a theoretical expression that links forward-looking risk premium to investors’ risk aversion and forward-looking volatility, skewness and kurtosis of cumulative return. In addition, investors’ risk aversion is theoretically linked to volatility spread, defined as the gap between the risk-neutr...

The Risk Free Rate and the Market Risk Premium

Market Risk Premium and Interest Rates

Equity Market Volatility and Expected Risk Premium

This paper revisits the time-series relation between the conditional risk premium and variance of the equity market portfolio. The main innovation is that we construct a measure of the ex ante equity market risk premium using corporate bond yield spread data. This measure is forward-looking and does not rely critically on either realized equity returns or instrumental variables. We find strong ...