Abstract:Abrupt and profound swings in economic activity can result in changes in systematic component of risk premia of capital market assets. This can translate into adjustments in risk perception by the market agents, which may lead to significant changes in real investment development. We examine the issue of time-varying systematic risk on a micro level using the capital asset pricing model in an intertemporal setting. We formulate the hypothesis within a bivariate GARCH-in-mean model, which enables us to estimate… Show more
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