TY  - JOUR
AU  - Pastor,Lubos
AU  - Sinha,Meenakshi
AU  - Swaminathan,Bhaskaran
TI  - Estimating the Intertemporal Risk-Return Tradeoff Using the Implied Cost of Capital
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11941
PY  - 2006
Y2  - January 2006
UR  - http://www.nber.org/papers/w11941
L1  - http://www.nber.org/papers/w11941.pdf
N1  - Author contact info:
Lubos Pastor
University of Chicago
Booth School of Business
5807 South Woodlawn Ave
Chicago, IL  60637
Tel: 773/834-4080
Fax: NA
E-Mail: lubos.pastor@chicagobooth.edu

Meenakshi Sinha
E-Mail: ms233@cornell.edu

Bhaskaran Swaminathan
Director of Research
LSV Asset Management
155 North Wacker Drive
Chicago, IL 60606
Tel: 312-327-5103
E-Mail: swami@lsvasset.com
AB  - We reexamine the time-series relation between the conditional mean and variance of stock market returns. To proxy for the conditional mean return, we use the implied cost of capital, computed using analyst forecasts. The usefulness of this proxy is shown in simulations. In empirical analysis, we construct the time series of the implied cost of capital for the G-7 countries. We find strong support for a positive intertemporal mean-variance relation at both the country level and the world market level. Some of our evidence is consistent with international integration of the G-7 financial markets.
ER  -