Aggregate volatility expectations and threshold CAPM

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dc.citation.epage253en_US
dc.citation.spage231en_US
dc.citation.volumeNumber34en_US
dc.contributor.authorArisoy, Y. E.en_US
dc.contributor.authorAltay-Salih, A.en_US
dc.contributor.authorAkdeniz, L.en_US
dc.date.accessioned2016-02-08T11:02:56Z
dc.date.available2016-02-08T11:02:56Z
dc.date.issued2015en_US
dc.description.abstractWe propose a volatility-based capital asset pricing model (V-CAPM) in which asset betas change discretely with respect to changes in investors' expectations regarding near-term aggregate volatility. Using a novel measure to proxy uncertainty about expected changes in aggregate volatility, i.e. monthly range of the VIX index (RVIX), we find that portfolio betas change significantly when uncertainty about aggregate volatility expectations is beyond a certain threshold level. Due to changes in their market betas, small and value stocks are perceived as riskier than their big and growth counterparts in bad times, when uncertainty about aggregate volatility expectations is high. The proposed model yields a positive and significant market risk premium during periods when investors do not expect significant uncertainty in near-term aggregate volatility. Our findings support a volatility-based time-varying risk explanation.en_US
dc.identifier.doi10.1016/j.najef.2015.09.013en_US
dc.identifier.issn1062-9408
dc.identifier.urihttp://hdl.handle.net/11693/26652
dc.language.isoEnglishen_US
dc.publisherElsevier Inc.en_US
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.najef.2015.09.013en_US
dc.source.titleNorth American Journal of Economics and Financeen_US
dc.subjectAggregate volatilityen_US
dc.subjectConditional CAPMen_US
dc.subjectRangeen_US
dc.subjectThreshold regressionen_US
dc.subjectVIXen_US
dc.titleAggregate volatility expectations and threshold CAPMen_US
dc.typeArticleen_US
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