Journal of Financial Economics Vol. 19 No. 1 1987

Expected stock returns and volatility

Kenneth R. French^1,2; G. William Schwert^1,2; Robert F. Stambaugh^1,2

¹ University of Chicago · ² University of Rochester

Abstract

This paper examines the relation between stock returns and stock market volatility. We find evidence that the expected market risk premium (the expected return on a stock portfolio minus the Treasury bill yield) is positively related to the predictable volatility of stock returns. There is also evidence that unexpected stock market returns are negatively related to the unexpected change in the volatility of stock returns. This negative relation provides indirect evidence of a positive relation between expected risk premiums and volatility.

DOI

10.1016/0304-405x(87)90026-2

Volume

19

Issue

1

Pages

3-29

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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