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Cited by 278

The DOI matches its Crossref record; 124 of the 124 references it cites were found in a registry or an index.

Time-Varying Risk Premium in Large Cross-Sectional Equity Data Sets

Open access
Gagliardini, Patrick, Ossola, Elisa, Scaillet, Olivier·2016·Econometrica
DOI 10.3982/ecta11069
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Abstract

We develop an econometric methodology to infer the path of risk premia from a large unbalanced panel of individual stock returns. We estimate the time-varying risk premia implied by conditional linear asset pricing models where the conditioning includes both instruments common to all assets and asset specific instruments. The estimator uses simple weighted two-pass cross-sectional regressions, and we show its consistency and asymptotic normality under increasing cross-sectional and time series dimensions. We address consistent estimation of the asymptotic variance by hard thresholding, and testing for asset pricing restrictions induced by the no-arbitrage assumption. We derive the restrictions given by a continuum of assets in a multi-period economy under an approximate factor structure robust to asset repackaging. The empirical analysis on returns for about ten thousands US stocks from July 1964 to December 2009 shows that risk premia are large and volatile in crisis periods. They exhibit large positive and negative strays from time-invariant estimates, follow the macroeconomic cycles, and do not match risk premia estimates on standard sets of portfolios. The asset pricing restrictions are rejected for a conditional four-factor model capturing market, size, value and momentum effects.

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Metadata

Authors
Gagliardini, P., Ossola, E., & Scaillet, O.
Venue
Econometrica
Publisher
The Econometric Society
Published
2016
Volume
84
Issue
3
Pages
985-1046
ISSN
0012-9682 (ISSN-L)
DOI
10.3982/ecta11069
OpenAlex
W1568004826
Cited by
278
References
124
FWCI
35.24
Type
journal article
Language
en
Open access
green

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