Type of Document Dissertation Author Famy, George URN etd-04282006-162928 Title Forecasting Reurns to Pure Factors: A Study of Time Varying Risk Premia Degree Ph.D. Department Finance Advisory Committee
Advisor Name Title Stephen D. Smith Committee Chair Keywords
- time varying risk premia
- conditional asset pricing
- business cycle
Date of Defense 2006-04-07 Availability restricted Abstract I find evidence of predictability in out-of-sample data for four risk premia using simple econometric models. Two factor return models are used, an APT model and the Wilshire Atlas. I demonstrate that investors can exploit conditioning information to manage their exposures to risk factors. The results suggest that the investment opportunities set changes in a large and an economically significant way. I show that the growth rate in money supply and trend in stock market valuations are the main drivers respectfully of the risk premia associated with the Book-to-Market and Size factors from the Wilshire model. The predictability results are mixed with respect to Business Cycle Theory. At times investors price business cycle risk while at other times they exhibit herding tendencies.Files
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