Complex Systems in Finance and Econometrics

2011 Edition
| Editors: Robert A. Meyers (Editor-in-Chief)

Financial Economics, Time Variation in the Market Return

  • Mark J. Kamstra
  • Lisa A. Kramer
Reference work entry

Article Outline


Definition of the Subject



The Equity Premium Puzzle

Time-Varying Equity Premia: Possible Biological Origins

Future Directions



Discount Rate Stock Return Dividend Yield Dividend Payment Residual Income 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
This is a preview of subscription content, log in to check access.


Primary Literature

  1. 1.
    Barber B, Odean T (2001) Boys will be boys: Gender, overconfidence, and common stock investment. Q J Econ 116:261–292CrossRefGoogle Scholar
  2. 2.
    Barsky RB, DeLong JB (1993) Why does the stock market fluctuate? Q J Econ 108:291–311CrossRefGoogle Scholar
  3. 3.
    Bakshi G, Chen Z (2005) Stock valuation in dynamic economies. J Financ Market 8:115–151Google Scholar
  4. 4.
    Brealey RA, Myers SC, Allen F (2006) Principles of corporate finance, 8th edn. McGraw-Hill Irwin, New YorkGoogle Scholar
  5. 5.
    Byrnes JP, Miller DC, Schafer WD (1999) Gender differences in risk taking: A meta-analysis. Psychol Bull 125:367–383CrossRefGoogle Scholar
  6. 6.
    Campbell JY, Kyle AS (1993) Smart money, noise trading and stock price behavior. Rev Econ Stud 60:1–34CrossRefGoogle Scholar
  7. 7.
    Carton S, Jouvent R, Bungener C, Widlöcher D (1992) Sensation seeking and depressive mood. Pers Individ Differ 13:843–849Google Scholar
  8. 8.
    Chiang R, Davidson I, Okuney J (1997) Some theoretical and empirical implications regarding the relationship between earnings, dividends and stock prices. J Bank Financ 21:17–35CrossRefGoogle Scholar
  9. 9.
    Cochrane JH (2001) Asset pricing. Princeton University Press, PrincetonGoogle Scholar
  10. 10.
    Coren S (1996) Sleep Thieves. Free Press, New YorkGoogle Scholar
  11. 11.
    Corradi V, Swanson NR (2005) Bootstrap specification tests for diffusion processes. J Econom 124:117–148CrossRefGoogle Scholar
  12. 12.
    Cross F (1973) The behavior of stock prices on Fridays and Mondays. Financ Anal J 29:67–69CrossRefGoogle Scholar
  13. 13.
    DeGennaro R, Kamstra MJ, Kramer LK (2005) Seasonal variation in bid-ask spreads. University of Toronto (unpublished manuscript)Google Scholar
  14. 14.
    Donaldson RG, Kamstra MJ (1996) A new dividend forecasting procedure that rejects bubbles in asset prices. Rev Financ Stud 9:333–383CrossRefGoogle Scholar
  15. 15.
    Donaldson RG, Kamstra MJ (2005) Volatility forecasts, trading volume, and the ARCH versus option-implied volatility trade-off. J Financ Res 28:519–538CrossRefGoogle Scholar
  16. 16.
    Donaldson RG, Kamstra MJ, Kramer LA (2007) Estimating the ex ante equity premium. University of Toronto ManuscriptGoogle Scholar
  17. 17.
    Dong M, Hirshleifer DA (2005) A generalized earnings-based stock valuation model. Manchester School 73:1–31CrossRefGoogle Scholar
  18. 18.
    Duffie D, Singleton KJ (1993) Simulated moments estimation of Markov models of asset prices. Econometrica 61:929–952CrossRefGoogle Scholar
  19. 19.
    Engle RF (1982) Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation. Econometrica 50:987–1007CrossRefGoogle Scholar
  20. 20.
    Fama EF, French KR (1993) Common risk factors in the returns on stocks and bonds. J Financ Econ 33:3–56CrossRefGoogle Scholar
  21. 21.
    Fama EF, French KR (2002) The equity premium. J Financ 57:637–659CrossRefGoogle Scholar
  22. 22.
    Farrell JL (1985) The dividend discount model: A primer. Financ Anal J 41:16–25CrossRefGoogle Scholar
  23. 23.
    Feltham GA, Ohlson JA (1995) Valuation and clean surplus accounting for operating and financial activities. Contemp Account Res 11:689–731CrossRefGoogle Scholar
  24. 24.
    Garrett I, Kamstra MJ, Kramer LK (2005) Winter blues and time variation in the price of risk. J Empir Financ 12:291–316CrossRefGoogle Scholar
  25. 25.
    Gordon M (1962) The Investment, Financing and Valuation of the Corporation. Irwin, HomewoodGoogle Scholar
  26. 26.
    Gordon NP, Cleary PD, Parker CE, Czeisler CA (1986) The prevalence and health impact of shiftwork. Am J Public Health 76:1225–1228CrossRefGoogle Scholar
  27. 27.
    Hackel KS, Livnat J (1996) Cash flow and security analysis. Irwin, ChicagoGoogle Scholar
  28. 28.
    Harlow WV, Brown KC (1990) Understanding and assessing financial risk tolerance: A biological perspective. Financ Anal J 6:50–80CrossRefGoogle Scholar
  29. 29.
    Harris L (1986) A transaction data study of weekly and intradaily patterns in stock returns. J Financ Econ 16:99–117CrossRefGoogle Scholar
  30. 30.
    Hawkins DF (1977) Toward an old theory of equity valuation. Financ Anal J 33:48–53CrossRefGoogle Scholar
  31. 31.
    Hersch J (1996) Smoking, seat belts and other risky consumer decisions: differences by gender and race. Managerial Decis Econ 17:471–481CrossRefGoogle Scholar
  32. 32.
    Horvath P, Zuckerman M (1993) Sensation seeking, risk appraisal, and risky behavior. Personal Individ Diff 14:41–52CrossRefGoogle Scholar
  33. 33.
    Hurley WJ, Johnson LD (1994) A realistic dividend valuation model. Financ Anal J 50:50–54CrossRefGoogle Scholar
  34. 34.
    Hurley WJ, Johnson LD (1998) Generalized Markov dividend discount models. J Portf Manag 24:27–31CrossRefGoogle Scholar
  35. 35.
    Jagannathan R, McGrattan ER, Scherbina A (2000) The declining US equity premium. Fed Reserve Bank Minneap Q Rev 24:3–19Google Scholar
  36. 36.
    Jain PC, Joh G (1988) The dependence between hourly prices and trading volume. J Financ Quant Analysis 23:269–283CrossRefGoogle Scholar
  37. 37.
    Jegadeesh N, Titman S (1993) Returns to buying winners and selling losers: Implications for stock market efficiency. J Financ 48:65–91CrossRefGoogle Scholar
  38. 38.
    Jorion P, Goetzmann WN (1999) Global stock markets in the twentieth century. J Financ 54:953–980CrossRefGoogle Scholar
  39. 39.
    Kamstra MJ (2003) Pricing firms on the basis of fundamentals. Fed Reserve Bank Atlanta Econ Rev First Quarter:49–70Google Scholar
  40. 40.
    Kamstra MJ, Kramer LA, Levi MD (2000) Losing sleep at the market: the daylight saving anomaly. Am Econ Rev 90:1005–1011CrossRefGoogle Scholar
  41. 41.
    Kamstra MJ, Kramer LA, Levi MD (2002) Losing sleep at the market: The daylight saving anomaly: Reply. Am Econ Rev 92:1257–1263CrossRefGoogle Scholar
  42. 42.
    Kamstra MJ, Kramer LA, Levi MD (2003) Winter blues: A SAD stock market cycle. Am Econ Rev 93:324–343CrossRefGoogle Scholar
  43. 43.
    Kamstra MJ, Kramer LA, Levi MD (2007) Opposing Seasonalities in Treasury versus Equity Returns. University of Toronto ManuscriptGoogle Scholar
  44. 44.
    Kamstra MJ, Kramer LA, Levi MD, Wermers R (2008) Seasonal asset allocation: evidence from mutual fund flows. University of Toronto ManuscriptGoogle Scholar
  45. 45.
    Keim DB (1983) Size-related anomalies and stock return seasonality: Further Empirical Evidence. J Financ Econ 12:13–32CrossRefGoogle Scholar
  46. 46.
    Kramer LA (2002) Intraday stock returns, time‐varying risk premia, and diurnal mood variation. University of Toronto ManuscriptGoogle Scholar
  47. 47.
    Lam RW (1998) Seasonal Affective Disorder: Diagnosis and management. Prim Care Psychiatry 4:63–74Google Scholar
  48. 48.
    Levi MD (1973) Errors in the variables bias in the presence of correctly measured variables. Econometrica 41:985–986CrossRefGoogle Scholar
  49. 49.
    Liu W (2006) A liquidity‐augmented capital asset pricing model. J Financ Econ 82:631–671CrossRefGoogle Scholar
  50. 50.
    McFadden D (1989) A method of simulated moments for estimation of discrete response models without numerical integration. Econometrica 47:995–1026CrossRefGoogle Scholar
  51. 51.
    Mehra R, Prescott EC (1985) The equity premium: A puzzle. J Monet Econ 15:145–161CrossRefGoogle Scholar
  52. 52.
    Mellinger GD, Balter MB, Uhlenhuth EH (1985) Insomnia and its treatment: prevalence and correlates. Arch Gen Psychiatry 42:225–232Google Scholar
  53. 53.
    Michaud RO, Davis PL (1982) Valuation model bias and the scale structure of dividend discount returns. J Financ 37:563–576CrossRefGoogle Scholar
  54. 54.
    Odean T (1998) Are investors reluctant to realize their losses? J Financ 53:1775–1798CrossRefGoogle Scholar
  55. 55.
    Odean T (1999) Do investors trade too much? Am Econ Rev 89:1279–1298CrossRefGoogle Scholar
  56. 56.
    Ogden JP (1990) Turn-of-month evaluations of liquid profits and stock returns: A common explanation for the monthly and January effects. J Financ 45:1259–1272CrossRefGoogle Scholar
  57. 57.
    Ohlson JA (1995) Earnings, book values, and dividends in equity valuation. Contemp Acc Res 11:661–687CrossRefGoogle Scholar
  58. 58.
    Pakes A, Pollard D (1989) Simulation and the asymptotics of optimization estimators. Econometrica 57:1027–1057CrossRefGoogle Scholar
  59. 59.
    Pástor Ľ, Stambaugh R (2001) The equity premium and structural breaks. J Financ 56:1207–1239Google Scholar
  60. 60.
    Penman SH (1998) Combining earnings and book value in equity valuation. Contemp Acc Res 15:291–324CrossRefGoogle Scholar
  61. 61.
    Penman SH, Sougiannis T (1998) A comparison of dividend, cash flow and earnings approaches to equity valuation. Contemp Acc Res 15:343–383CrossRefGoogle Scholar
  62. 62.
    Peters DJ (1991) Using PE/Growth ratios to develop a contrarian approach to growth stocks. J Portf Manag 17:49–51CrossRefGoogle Scholar
  63. 63.
    Rappaport A (1986) The affordable dividend approach to equity valuation. Financ Anal J 42:52–58CrossRefGoogle Scholar
  64. 64.
    Reinganum MR (1983) The anomalous stock market behavior of small firms in January. J Financ Econ 12:89–104CrossRefGoogle Scholar
  65. 65.
    Rietz TA (1988) The equity risk premium: A solution. J Monet Econ 22:117–31CrossRefGoogle Scholar
  66. 66.
    Rogalski RJ (1984) New findings regarding day-of-the-week returns: A note. J Financ 35:1603–1614CrossRefGoogle Scholar
  67. 67.
    Rosenthal NE (1998) Winter Blues: Seasonal Affective Disorder: What is It and How to Overcome It, 2nd edn. Guilford Press, New YorkGoogle Scholar
  68. 68.
    Rozeff MS, Kinney WR (1976) Capital market seasonality: The case of stock returns. J Financ Econ 3:379–402CrossRefGoogle Scholar
  69. 69.
    Rubinstein M (1976) The valuation of uncertain income streams and the pricing of options. Bell J Econ 7:407–425CrossRefGoogle Scholar
  70. 70.
    Schlager D, Froom J, Jaffe A (1995) Winter depression and functional impairment among ambulatory primary care patients. Compr Psychiatry 36:18–24CrossRefGoogle Scholar
  71. 71.
    Shefrin H (2005) A Behavioral Approach to Asset Pricing. Academic Press, OxfordGoogle Scholar
  72. 72.
    Spira AP, Friedman L, Flint A, Sheikh J (2005) Interaction of sleep disturbances and anxiety in later life: perspectives and recommendations for future research. J Geriatr Psychiatry Neurol 18:109–115CrossRefGoogle Scholar
  73. 73.
    Sorensen EH, Williamson DA (1985) Some evidence on the value of dividend discount models. Financ Anal J 41:60–69CrossRefGoogle Scholar
  74. 74.
    Weil P (1989) The equity premium puzzle and the risk-free rate puzzle. J Monet Econ 24:401–421CrossRefGoogle Scholar
  75. 75.
    White H (2000) A reality check for data snooping. Econometrica 68:1097–1126CrossRefGoogle Scholar
  76. 76.
    Wong A, Carducci B (1991) Sensation seeking and financial risk taking in everyday money matters. J Bus Psychol 5:525–530CrossRefGoogle Scholar
  77. 77.
    Wood RA, McInish TH, Ord JK (1985) An investigation of transactions data for NYSE stocks. J Financ 40:723–741CrossRefGoogle Scholar
  78. 78.
    Yao Y (1997) A trinomial dividend valuation model. J Portf Manag 23:99–103CrossRefGoogle Scholar
  79. 79.
    Young MA, Meaden PM, Fogg LF, Cherin EA, Eastman CI (1997) Which environmental variables are related to the onset of Seasonal Affective Disorder? J Abnorm Psychol 106:554–562CrossRefGoogle Scholar
  80. 80.
    Zuckerman M (1976) Sensation seeking and anxiety, traits and states, as determinants of behavior in novel situations. In: Sarason IG, Spielberger CD (eds) Stress and Anxiety, vol 3. Hemisphere, Washington DCGoogle Scholar
  81. 81.
    Zuckerman M (1983) Biological Bases of Sensation Seeking, Impulsivity and Anxiety. Lawrence Erlbaum Associates, HillsdaleGoogle Scholar
  82. 82.
    Zuckerman M (1984) Sensation seeking: A comparative approach to a human trait. Behav Brain Sci 7:413–471CrossRefGoogle Scholar
  83. 83.
    Zuckerman M, Buchsbaum MS, Murphy DL (1980) Sensation seeking and its biological correlates. Psychol Bull 88:187–214CrossRefGoogle Scholar
  84. 84.
    Zuckerman M, Eysenck S, Eysenck HJ (1978) Sensation seeking in England and America: Cross-cultural, age, and sex comparisons. J Consult Clin Psychol 46:139–149CrossRefGoogle Scholar

Books and Reviews

  1. 85.
    Dimson E (1988) Stock Market Anomalies. Cambridge University Press, CambridgeGoogle Scholar
  2. 86.
    Kocherlakota NR (1996) The equity premium: It's still a puzzle. J Econ Lit 34:42–71Google Scholar
  3. 87.
    Mehra R (2003) The equity premium: Why is it a puzzle? Financ Anal J 59:54–69CrossRefGoogle Scholar
  4. 88.
    Mehra R, Prescott EC (2003) The equity premium in retrospect. In: Constantinides GM, Harris M, Stulz RM (eds) Handbook of the Economics of Finance: Financial Markets and Asset Pricing, vol 1B. North Holland, Amsterdam, pp 889–938Google Scholar
  5. 89.
    Penman S (2003) Financial Statement Analysis and Security Valuation, 2nd edn. McGraw-Hill/Irwin, New YorkGoogle Scholar
  6. 90.
    Siegel JJ, Thaler RH (1997) Anomalies: The equity premium puzzle. J Econ Perspect 11:191–200Google Scholar
  7. 91.
    Thaler RH (2003) The Winner's Curse: Paradoxes and Anomalies of Economic Life. Princeton University Press, Princeton Google Scholar

Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  • Mark J. Kamstra
    • 1
  • Lisa A. Kramer
    • 2
  1. 1.Schulich School of BusinessYork UniversityTorontoCanada
  2. 2.Rotman School of ManagementUniversity of TorontoTorontoCanada