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 premiumfor 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.
| Original language | English |
|---|---|
| Pages (from-to) | 1701-1737 |
| Number of pages | 37 |
| Journal | Review of Finance |
| Volume | 21 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 1 Jul 2017 |
Bibliographical note
Publisher Copyright:© The Authors 2016.
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics