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The long-run risk premium in the intertemporal CAPM: International evidence

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  • Sakemoto, Ryuta

Abstract

This study investigates whether long-run conditional covariance risk is linked to expected returns in the Intertemporal CAPM framework. We observe that the long-run value risk is positively associated with the expected returns on the global portfolios excluding the US. We also find that the long-run momentum risk is negatively related to the expected returns. In contrast, the long-run market risk is not associated with them, due to the low covariance variation across portfolios. Finally, we uncover that the long-run value premiums were strong for the global and European portfolios before the COVID-19 pandemic.

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  • Sakemoto, Ryuta, 2023. "The long-run risk premium in the intertemporal CAPM: International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:intfin:v:89:y:2023:i:c:s1042443123001221
    DOI: 10.1016/j.intfin.2023.101854
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    Keywords

    ICAPM; Long-run risk; Value anomalies; Factor models; COVID-19; DCC-MIDAS;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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