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- Title
Characterizing the Asymmetric Dependence Premium.
- Authors
Alcock, Jamie; Hatherley, Anthony
- Abstract
We examine the price of asymmetric dependence (AD) in the cross section of US equities. Using a β-invariant AD metric, we demonstrate that the return premium for AD is approximately 47% of the premium for β. The premium for lower-tail AD is equivalent to 26% of the market risk premium and has been relatively constant through time. The discount associated with upper-tail AD is 29% of themarket risk premium and has been increasing markedly in recent years. Our findings have substantial implications for the cost of capital, investor expectations, portfolio management, and performance assessment.
- Subjects
STOCKS (Finance); FINANCIAL risk management; FINANCIAL performance; INVESTORS; CAPITAL costs
- Publication
Review of Finance, 2017, Vol 21, Issue 4, p1701
- ISSN
1572-3097
- Publication type
Article
- DOI
10.1093/rof/rfw022