search query: @author Nelson, C. R. / total: 7
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| Author: | Kim, C.-J. Morley, J. C. Nelson, C. R. |
| Title: | Does an intertemporal tradeoff between risk and return explain mean reversion in stock prices? |
| Journal: | Journal of Empirical Finance
2001 : SEP, VOL. 8:4, p. 403-426 |
| Index terms: | SHARE PRICES VOLATILITY RETURN ON INVESTMENT |
| Language: | eng |
| Abstract: | When volatility feedback is taken into account, there is strong evidence of a positive tradeoff between stock market volatility and expected returns on a market portfolio. In this paper, the authors ask whether this intertemporal tradeoff between risk and return is responsible for the reported evidence of mean reversion in stock prices. There are two relevant findings. First, price movements not related to the effects of Markov-switching market volatility are largely unpredictable over long horizons. Second, time- varying parameter estimates of the long-horizon predictability of stock returns reject any systematic mean reversion in favour of behaviour implicit in the historical timing of the tradeoff between risk and return. |
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