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Risk-free rate effects on conditional variances and conditional correlations of stock returns
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Palandri, Alessandro (2014) Risk-free rate effects on conditional variances and conditional correlations of stock returns. Journal of Empirical Finance, Volume 25 . pp. 95-111. doi:10.1016/j.jempfin.2013.12.002 ISSN 0927-5398.
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Official URL: http://dx.doi.org/10.1016/j.jempfin.2013.12.002
Abstract
This paper investigates whether the risk-free rate may explain the movements observed in the conditional second moments of asset returns. Original results are derived, within the C-CAPM framework, that attest the existence of a channel connecting these seemingly unrelated quantities. The empirical results, involving 165 time series of stock returns quoted at the NYSE, show that the risk-free rate does contain information that is relevant in predicting the 165 conditional variances and 13,530 conditional correlations. These findings are particularly pronounced at lower frequencies where the persistence of the conditional second moments is significantly weaker.
| Item Type: | Journal Article | ||||
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Financial Econometrics Research Centre Faculty of Social Sciences > Warwick Business School |
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| Journal or Publication Title: | Journal of Empirical Finance | ||||
| Publisher: | Elsevier | ||||
| ISSN: | 0927-5398 | ||||
| Official Date: | January 2014 | ||||
| Dates: |
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| Volume: | Volume 25 | ||||
| Page Range: | pp. 95-111 | ||||
| DOI: | 10.1016/j.jempfin.2013.12.002 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access |
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