Frequency Dependent Risk

Andreas Neuhierl*, Rasmus T. Varneskov

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstrakt

We provide a model-free framework for studying the dynamics of the state vector and its risk prices. Specifically, we derive a frequency domain decomposition of the unconditional asset return premium in a general setting with a log-affine stochastic discount factor (SDF). Importantly, we show that the cospectrum between returns and the SDF only displays frequency dependencies through the state vector and that its dynamics and risk prices can be inferred from covariances between asset (portfolio) returns, that is, from the cross-section. Empirically, we find low and high-frequency state vector risk to be differentially priced for US equities.
OriginalsprogEngelsk
TidsskriftJournal of Financial Economics
Vol/bind140
Udgave nummer2
Sider (fra-til)644-675
Antal sider32
ISSN0304-405X
DOI
StatusUdgivet - maj 2021

Bibliografisk note

Published online: 15. Januar 2021

Emneord

  • Asset pricing
  • Factor models
  • Nonparametric measures
  • Spectral analysis

Citationsformater