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|Title:||Asset pricing, time-varying risk premia and interest rate risk|
Interest rate risk
|Citation:||Flannery, M.J.,Hameed, A.S.,Harjes, R.H. (1997). Asset pricing, time-varying risk premia and interest rate risk. Journal of Banking and Finance 21 (3) : 315-335. ScholarBank@NUS Repository.|
|Abstract:||This paper investigates the role of interest rate risk in explaining security price changes. We develop and test a two-factor linear beta pricing model of security returns in which the factors are the excess returns on the long-term, riskless bond and the equal-weighted equity market index. We find that time-variation in the interest rate and market risk premia influence expected security returns. Furthermore, conditional interest rate volatility affects security returns, particularly during periods of substantial interest rate movements.|
|Source Title:||Journal of Banking and Finance|
|Appears in Collections:||Staff Publications|
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