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Dispersion of Beliefs, Ambiguity, and the Cross-Section of Stock Returns

Title
Dispersion of Beliefs, Ambiguity, and the Cross-Section of Stock Returns
Author
민병규
Keywords
Ambiguity; Dispersion of beliefs; Cross-section of stock returns
Issue Date
2019-01
Publisher
ELSEVIER SCIENCE BV
Citation
JOURNAL OF EMPIRICAL FINANCE, v. 50, Page. 43-56
Abstract
We examine whether ambiguity is priced in the cross-section of expected stock returns. Using the cross-sectional dispersion in real-time forecasts of real GDP growth as a measure for ambiguity, we find that high ambiguity beta stocks earn lower future returns relative to low ambiguity beta stocks. This negative predictive relation between the ambiguity beta and future returns is consistent with theory, which predicts the marginal utility of consumption to rise when ambiguity is high. We further show that the ambiguity premium remains significant after controlling for exposures to expected real GDP growth, VIX, and financial market dislocations index.
URI
https://www.sciencedirect.com/science/article/pii/S0927539819300015?via%3Dihubhttps://repository.hanyang.ac.kr/handle/20.500.11754/151521
ISSN
0927-5398; 1879-1727
DOI
10.1016/j.jempfin.2019.01.001
Appears in Collections:
COLLEGE OF ECONOMICS AND FINANCE[S](경제금융대학) > ECONOMICS & FINANCE(경제금융학부) > Articles
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