Expected Stock Returns and Volatility
Kenneth
R. French
Tuck School, Dartmouth College, Hanover, NH
and National Bureau of Economic Research
G. William Schwert
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
Robert
F. Stambaugh
University of Pennylvania, Philadelphia, PA
and National Bureau of Economic Research
Journal of Financial Economics, 19 (September 1987) 3-29
JFE All
Star Paper
This paper examines the relation between stock returns and stock market
volatility. We find evidence that the expected market risk premium (the expected
return on a stock portfolio minus the Treasury bill yield) is positively related
to the predictable volatility of stock returns. There is also evidence that
unexpected stock market returns are negatively related to the unexpected change
in the volatility of stock returns. This negative relation provides indirect
evidence of a positive relation between expected risk premiums and volatility.
Key words: Stock Market, Volatility, Leverage, ARIMA, GARCH
JEL Classifications: G12, G14
Cited 1,896 times in the SSCI and SCOPUS through 2020
© Copyright 1987, Elsevier
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