Understanding Risk and Return

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Understanding Risk and Return

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Title: Understanding Risk and Return
Author: Campbell, John
Citation: Campbell, John Y. 1996. Understanding risk and return. Journal of Political Economy 104, no. 2: 298-345.
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Abstract: This paper uses an equilibrium multifactor model to interpret the cross-sectional pattern of postwar U.S. stock and bond returns. Priced factors include the return on a stock index, revisions in forecasts of future stock returns (to capture intertemporal hedging effects), and revisions in forecasts of future labor income growth (proxies for the return on human capital). Aggregate stock market risk is the main factor determining excess returns; but in the presence of human capital or stock market mean reversion, the coefficient of relative risk aversion is much higher than the price of stock market risk.
Published Version: http://dx.doi.org/10.1086/262026
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3153293

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  • FAS Scholarly Articles [7374]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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