This paper uses direct estimates of expected returns to examine the link between standard measures of financial risk and investor return requirements. The results show that systematic risk commands a significant positive risk premium, much larger than found using historical returns as proxies...

Information can be differential or "incomplete" in two different ways: as a result of the quality of information itself or as a result of the manner in which information is distributed to investors. The effect on capital market equilibrium under either scenario is that higher returns will be...