Subjective Risk Premia
Stefan Nagel, Fama Family Professor of Finance
Most research on the dynamics of risk premia in financial markets focuses on the risk premia implied by statistical models estimated with in-sample regressions ex post. These risk premia may not reflect the risk premia perceived by investors in real time, without the benefit of ex-post hindsight. The objective of this project is to study the dynamics of subjective risk premia implied by asset price or return forecasts of professional forecasters and individual investors across a range of different markets, including stocks, bonds, foreign exchange, and commodities. The results of this study will provide new insights into the role of time-varying risk premia in generating asset-price movements.
Dynamics of Subjective Risk Premia, (with Zhengyang Xu) Journal of Financial Economics, November 2023.