The Executive Turnover Risk Premium

We establish that CEOs of companies experiencing volatile industry conditions are more likely to be dismissed. At the same time, accounting for various other factors, industry risk is unlikely to be associated with CEO compensation other than through dismissal risk. Using this identification strategy, we document that CEO turnover risk is significantly positively associated with compensation. This finding is important because job‐risk‐compensating wage differentials arise naturally in competitive labor markets. By contrast, the evidence rejects an entrenchment model according to which powerful CEOs have lower job risk and at the same time secure higher compensation.     

Equity Risk Premium

Abstract

The equity risk premium (ERP) is an essential building block of the market value of risk. In theory, the collective action of all investors results in an equilibrium expectation for the return on the market portfolio excess of the risk-free return, the ERP. The ability of the valuation actuary to choose a sensible value for the ERP, whether as a required input to capital asset pricing model valuation, or any of its descendants, is as important as choosing risk-free rates and risk relatives (betas) to the ERP for the asset at hand.

The historical realized ERP for the stock market appears to be at odds with pricing theory parameters for risk aversion. Since 1985, there has been a constant stream of research, each of which reviews theories of estimating market returns, examines historical data periods, or both. Those ERP value estimates vary widely from about ?1% to about 9%, based on a geometric or arithmetic averaging, short or long horizons, short- or long-run expectations, unconditional or conditional distributions, domestic or international data, data periods, and real or nominal returns.

This paper examines the principal strains of the recent research on the ERP and catalogues the empirical values of the ERP implied by that research. In addition, the paper supplies several time series analyses of the standard Ibbotson Associates 1926–2002 ERP data using short Treasuries for the risk-free rate. Recommendations for ERP values to use in common actuarial valuation problems also are offered.     

Modeling Foreign Exchange Risk Premium in Armenia

This paper applies stochastic discount factor methodology to modeling the foreign exchange risk premium in Armenia. We use weekly data on foreign and domestic currency deposits, which coexist in the Armenian banking system. This coexistence implies elimination of the cross-country risks and transaction costs, leaving the pure foreign exchange risk. It is shown that there exists a systematic time-varying risk premium that increases with maturity. Using two-currency affine term structure and generalized autoregressive conditional heteroskedasticity (GARCH)-in-mean models, we find that the central bank's foreign exchange market interventions and ratio-of-deposit volumes significantly affect public expectations about foreign exchange fluctuations. We also find that the foreign exchange risk premium accounts for the largest part of the interest differential. When accounting for economic and institutional differences, our results can be extended to other countries.     

A股市场股权风险溢价的历史及启示

本文计算了1992～2000年、2001～2005年以及1992～2005年三个时间窗口下A股市场的股权风险溢价率；基于历史数据，就投资者所要求的股权风险溢价、通货膨胀与股权风险溢价的关系等问题进行了初步分析；相关分析也隐含了A股市场发展的政策建议。     

REIT Risk Premium Sensitivity and Interest Rates

This analysis investigates several aspects of the relationship between daily REIT stock risk premiums and various interest rates. Consistent with prior research, the general findings indicate that interest rates do impact REIT returns. This study specifically finds that stock returns are more sensitive to maturity rate spread between short- and long-term treasuries than the credit rate spread between commercial bonds and treasuries. In addition, the analyses document a structural model shift during the nineties that has made REITs more sensitive to credit risk. In additional to change in investor clientele, an analysis of declining REIT credit-worthiness points to a root cause for this shift.     

The Equity Market Risk Premium and the Valuation of Overseas Investments

There is little agreement among academics or practitioners about how to measure the size of the equity market risk premium, particularly when it relates to investments in emerging markets. Using monthly equity returns for 22 developed and 24 emerging markets covering the period 1976–2006, the authors find that developed capital markets have experienced significant increases in their degree of integration with the U.S. and world market indexes, while emerging markets remain at least partly segmented from those of the U.S. and the world. For countries that are reasonably well integrated into global capital markets, the authors suggest using the U.S.—based equity market risk premium. But when valuing investments in emerging markets, they recommend use of the Capital Asset Pricing Model adjusted for political risk and a measure of co‐movement between the foreign and U.S. stock markets. The authors also remind readers that the equity market risk premium is supposed to be a forward‐looking measure, and that the common practice of inferring the future from the past can be misleading, particularly in the case of rapidly developing emerging markets.     

中国违约风险溢酬研究

违约风险的存在会对公司债券等固定收益证券的定价产生影响。在不存在违约风险的情况下，标的资产的价格直接按照无风险利率进行贴现；在存在违约风险时，必须考虑违约风险。     

折现率中股权风险溢价的确定

折现率中的股权风险溢价一般采用资本资产定价模型来确定,但由于资本资产定价模型建立在投资者理性、股票市场有效等前提基础之上,而中国股票市场的有效性比较欠缺,在评估实践中运用资本定价模型确定股权风险溢价存在较多的问题。本文从实体经济领域着手,通过投入产出分析、经营杠杆及财务杠杆分析,计算出行业相对于整体经济的风险系数、目标企业相对于行业的风险系数,进而得到行业股权风险溢价和目标企业的股权风险溢价。     

The Value Premium

The value anomaly arises naturally in the neoclassical framework with rational expectations. Costly reversibility and countercyclical price of risk cause assets in place to be harder to reduce, and hence are riskier than growth options especially in bad times when the price of risk is high. By linking risk and expected returns to economic primitives, such as tastes and technology, my model generates many empirical regularities in the cross‐section of returns; it also yields an array of new refutable hypotheses providing fresh directions for future empirical research.     

Estimating the Equity Risk Premium Using Accounting Fundamentals

This study uses recent developments in the theoretical modelling of the links between unrecorded accounting goodwill, accounting profitability and the cost of equity, together with Capital Asset Pricing Model (CAPM) betas, to estimate the ex-ante equity risk premium in the UK. The results suggest that, over our sample period from 1968 to 1995, the premium has been in the region of 5%. Our estimate lends support to the view that the ex-ante equity risk premium is substantially less than the historical average of the excess of equity returns over the risk-free rate, and is similar to the rates applied recently by UK competition regulators.     

The Pollution Premium

This paper studies the asset pricing implications of industrial pollution. A long-short portfolio constructed from firms with high versus low toxic emission intensity within an industry generates an average annual return of 4.42%, which remains significant after controlling for risk factors. This pollution premium cannot be explained by existing systematic risks, investor preferences, market sentiment, political connections, or corporate governance. We propose and model a new systematic risk related to environmental policy uncertainty. We use the growth in environmental litigation penalties to measure regime change risk and find that it helps price the cross section of emission portfolios' returns.     

The Equity Premium

We estimate the equity premium using dividend and earnings growth rates to measure the expected rate of capital gain. Our estimates for 1951 to 2000, 2.55 percent and 4.32 percent, are much lower than the equity premium produced by the average stock return, 7.43 percent. Our evidence suggests that the high average return for 1951 to 2000 is due to a decline in discount rates that produces a large unexpected capital gain. Our main conclusion is that the average stock return of the last half-century is a lot higher than expected.     

金融危机下审计收费风险溢价的研究

基于2008年金融危机这一外生冲击,本文考察了公司风险与审计收费间的关系。研究发现,当危机下公司的经营风险提高时,会计师事务所的审计收费增加,表明公司审计费用存在风险溢价。针对不同行业的分析显示,对于出口型企业,因受危机的影响严重,公司审计收费与经营风险显著正相关;基于不同性质公司的研究表明,由于政府的隐形担保,危机下国有公司的审计费用并未随经营风险的增加而提高;最后,金融危机下审计收费风险溢价现象主要存在于非四大审计的公司。     

中国股票市场风险溢价研究

本文通过综合资产定价理论和实证文献研究结论,对1997年到2009年中国股市A股股票的风险溢价的截面差异作了详尽的实证研究。我们构造25个投资组合作为检验资产,进行Fama-MacBeth两步回归法,建立了基于市场风险溢价,账面市值比,盈利股价比,现金流股价比,投资资本比,工业增加值变化率以及回购利率和期限利差的八因素模型。我们的主要发现有以下三点:一是相对于Fama-French三因素模型,我们模型的实证解释力有显著提高;二是与过去的文献不同,我们发现回购利率和期限利差等债市指标对股市风险溢价的截面数据有显著解释能力;三是与基于投资的资产定价理论一致,我们发现投资比率和现金流股价比能显著反映我国股市的风险溢价。     

公司债的非流动性与风险溢价——基于中国的实证研究

本文基于四种非流动性测度,考察了公司债层面和市场层面影响中国公司债非流动性的因素,讨论了公司债非流动性、权益波动率、印花税调整等因素对公司债风险溢价的影响。研究发现,在控制了信用评级和发行人权益波动率后,在截面上只有Amihud(2002)非流动性测度对公司债风险溢价有正的显著影响。此外,公司债发行人权益波动率和2008年的两次印花税调整对公司债风险溢价有正的稳健显著影响。     

A Habit-Based Explanation of the Exchange Rate Risk Premium

This paper presents a model that reproduces the uncovered interest rate parity puzzle. Investors have preferences with external habits. Countercyclical risk premia and procyclical real interest rates arise endogenously. During bad times at home, when domestic consumption is close to the habit level, the representative investor is very risk averse. When the domestic investor is more risk averse than her foreign counterpart, the exchange rate is closely tied to domestic consumption growth shocks. The domestic investor therefore expects a positive currency excess return. Because interest rates are low in bad times, expected currency excess returns increase with interest rate differentials.     

Delta-Hedged Gains and the Negative Market Volatility Risk Premium

We investigate whether the volatility risk premium is negativeby examining the statistical properties of delta-hedged optionportfolios (buy the option and hedge with stock). Within a stochasticvolatility framework, we demonstrate a correspondence betweenthe sign and magnitude of the volatility risk premium and themean delta-hedged portfolio returns. Using a sample of S&P500 index options, we provide empirical tests that have thefollowing general results. First, the delta-hedged strategyunderperforms zero. Second, the documented underperformanceis less for options away from the money. Third, the underperformanceis greater at times of higher volatility. Fourth, the volatilityrisk premium significantly affects delta-hedged gains, evenafter accounting for jump fears. Our evidence is supportiveof a negative market volatility risk premium.     

中国股票市场流动性风险溢价研究

本文在对Fama三因素模型和LACAPM模型进行改进的基础上,实证研究了中国股票市场的流动性风险溢价、规模效应以及价值效应。实证结果发现,改进的FAMA三因素模型能够比CAPM更好地解释价值效应,但却不能解释规模效应和流动性风险溢价现象;而改进的LACAPM在解释市场异象上的有效性则明显优于其他定价模型。     

Modelling the Currency Forward Risk Premium: A New Perspective

In this paper we seek to develop a new approach to the time series analysis of foreign exchange risk premia. We do so by assuming a geometric Brownian process for the spot exchange rate and expressing the no-arbitrage spot-forward price relationship under the historical probability measure. We are thereby able to obtain a stochastic differential equation system linking the spot exchange rate, the forward exchange rate and the risk premium (modelled directly as a mean-reverting diffusion process) which we estimate using Kalman filtering techniques. We are able to use observations at a range of frequencies since the framework we set up does not involve overlapping observations. The model is then applied to the French Franc/USD, DEM/USD, GBP/USD, and Japanese Yen/USD exchange rates from 1 January 1990 to 31 December 1998. For all currencies we find evidence that the forward risk premium is stationary and exhibits substantial positive time variation.