Unemployment, Inflation, and Common Stock Returns

Deskripsi

Investigates the relationship between macroeconomic risk and common stock returns, moving beyond the standard Capital Asset Pricing Model (CAPM). The authors propose a multifactor model where a stock's expected return is determined not only by its sensitivity to the market portfolio (the market beta) but also by its sensitivity to unexpected changes in unemployment and inflation. Their key finding is that both unemployment and inflation are statistically significant factors in explaining security returns over the decade, carrying positive risk premia.