Abstract
We examine the price of asymmetric dependence (AD) in the cross-section of US equities. Using a ß-invariant AD metric - the adjusted J statistic - we demonstrate that the return premium for AD is approximately 47% of the premium for ß. 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 the market 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 |
|---|---|
| Title of host publication | Assymetric Dependence in Finance |
| Subtitle of host publication | Diversification, Correlation and Portfolio Management in Market Downturns |
| Publisher | Wiley-VCH Verlag |
| Pages | 47-74 |
| Number of pages | 28 |
| ISBN (Electronic) | 9781119288992 |
| ISBN (Print) | 9781119289012 |
| DOIs | |
| Publication status | Published - 27 Mar 2017 |
Bibliographical note
Publisher Copyright:© 2018 John Wiley & Sons Ltd. All rights reserved.
Keywords
- J statistic
- LTAD
- Market risk premium
- Price information
- US equities
- UTAD
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- General Business,Management and Accounting