Empirical analysis of market connectedness as a risk factor for explaining expected stock returns

Shijie Deng; Min Sim; Xiaoming Huo

doi:10.1007/978-3-319-33976-4_12

Empirical analysis of market connectedness as a risk factor for explaining expected stock returns

Shijie Deng, Min Sim, Xiaoming Huo

Dept. of Industrial Engineering

Georgia Institute of Technology

Research output: Chapter in Book/Report/Conference proceeding › Chapter › peer-review

Abstract

Analyzing financial asset returns by identifying market-wide risk drivers and common firm-level characteristics that contribute to the explanation of expected asset returns has evolved into one major research field in the development of the modern asset pricing theory. The Capital Asset Pricing Model (CAPM) developed by Treynor (1962, 1961, Market value, time, and risk, “unpublished�?), Sharpe (1964), Lintner (1965a, b), and Mossin (1966) initiated this strand of research, which is referred to as the single-factor model. The single-factor model identifies a single index, or a market portfolio, as the sole driver of the return of financial assets and decomposes individual asset return risk into systematic and idiosyncratic components.

Original language	English
Title of host publication	Portfolio Construction, Measurement, and Efficiency
Subtitle of host publication	Essays in Honor of Jack Treynor
Publisher	Springer International Publishing
Pages	275-289
Number of pages	15
ISBN (Electronic)	9783319339764
ISBN (Print)	9783319339740
DOIs	https://doi.org/10.1007/978-3-319-33976-4_12
State	Published - 1 Jan 2016

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abstract = "Analyzing financial asset returns by identifying market-wide risk drivers and common firm-level characteristics that contribute to the explanation of expected asset returns has evolved into one major research field in the development of the modern asset pricing theory. The Capital Asset Pricing Model (CAPM) developed by Treynor (1962, 1961, Market value, time, and risk, “unpublished�?), Sharpe (1964), Lintner (1965a, b), and Mossin (1966) initiated this strand of research, which is referred to as the single-factor model. The single-factor model identifies a single index, or a market portfolio, as the sole driver of the return of financial assets and decomposes individual asset return risk into systematic and idiosyncratic components.",

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Empirical analysis of market connectedness as a risk factor for explaining expected stock returns

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