Seminar with Martijn F. Boons, Tilburg School of Economics and Management, Tilburg University

Upcoming Finance Seminar with Martijn F. Boons, Tilburg School of Economics and Management, Tilburg UniversityMartijn F. Boons will present:State variable hedging and individual stocks: New evidence for the ICAPMI construct a range of individual stock-based mimicking portfolios for innovations in three variables that describe investment opportunities: Dividend Yield (DY), Default Spread (DS) and Term Spread (TS). I find that each risk factor can be hedged well out-of-sample. DY risk is not priced, whereas DS and TS risk are priced at -4.5% and +5.5%, respectively, for the average mimicking portfolio. The DS risk premium is realized in recessions alone and is a Size effect. The TS risk premium is stable and separate from the Fama and French (1993) factors and characteristics. This evidence is consistent with the Intertemporal CAPM of Merton (1973), and adds to existing portfolio-level evidence that is (i) largely silent on how to hedge and (ii) mixed and inconclusive on the issue of pricing.