Volatility and the Pricing Kernel

We show empirically that negative stock market returns are significantly more painful to investors when they occur in periods of low volatility, which is reflected in a steeper pricing kernel. In contrast, popular asset pricing theories imply that the pricing of stock market risk does not vary with volatility, or that it moves in the opposite direction. This counterfactual pricing kernel behavior is necessary to rationalize the level and predictability of stock market returns in the models

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Year of publication:	[2022]
Authors:	Schreindorfer, David ; Sichert, Tobias
Publisher:	[S.l.] : SSRN
Subject:	Volatilität \| Volatility \| Optionspreistheorie \| Option pricing theory \| CAPM \| Börsenkurs \| Share price \| ARCH-Modell \| ARCH model

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