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| Author: | Li, Y. |
| Title: | Time-varying stock returns and labor income risks in the US and UK |
| Journal: | European Journal of Finance
2011 : APR, VOL 17:4 p. 321-336 |
| Index terms: | USA United Kingdom asset valuation stock markets volatility incomes exchange rates |
| Language: | eng |
| Abstract: | This paper proposes and estimates conditional asset pricing models where the risk premiums of the markets are associated with the conditional covariance of the markets with labor income growth within and across countries and the volatility of the markets are related to the shocks and interactions of stock returns and labor income growth. It is found that the risk premiums for the US and UK stock markets are more related to the conditional covariance of returns with the labor income growth within countries than across countries. The results are overall consistent with the hypothesis that prices of domestic stocks are determined to a greater extent by stochastic discount factors of domestic investors and vice versa. |
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