Poghosyan, Tigran; Kocenda, Evzen - 2007
variability of the risk
premium.
KEYWORDS: foreign exchange risk, time-varying risk premium, stochastic discount factor … opportunities, excess return should be equal to zero if agents are
risk neutral, and to a time-varying element φ
t
if agents are … investment
through period t+1. The premium can be positive or negative, depending on the time-varying
sources of the risk …