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| Author: | Mele, A. |
| Title: | Asymmetric stock market volatility and the cyclical behavior of expected returns |
| Journal: | Journal of Financial Economics
2007 : NOV, VOL. 86:2, p. 446-478 |
| Index terms: | business cycles return on investment stock markets volatility |
| Language: | eng |
| Abstract: | This article develops a framework to study the causes of countercyclical stock market volatility. It i found that countercyclical risk premia do not imply countercyclical return volatility. Instead, countercyclical stock volatility occurs if risk premia increase more in bad times than they decrease in good times, thereby inducing priceĀdividend ratios to fluctuate more in bad times than in good. The business cycle asymmetry in the investorsĀ attitude toward discounting future cash flows plays a novel and critical role in many rational explanations of asset price fluctuations. |
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