A Capital Asset Pricing Model with Time-Varying Covariances

摘要: The capital asset pricing model provides a theoretical structure for the of assets with uncertain returns. premium to induce risk-averse investors bear risk is proportional nondiversifiable risk, which measured by covariance return market portfolio return. In this paper multivariate generalized autoregressive conditional heteroscedastic process estimated returns bills, bonds, and stock where expected convariance each that fully diversified or portfolio. It found covariances are quite variable over time significant determinant time-varying premia. implied betas also forecastable. However, there evidence other variables including innovations in consumption should be considered investor's information set when estimating distribution