%0 Journal Article %1 Berkman:JFE:2011 %A Berkman, Henk %A Jacobsen, Ben %A Lee, John B. %D 2011 %J Journal of Financial Economics %K disaster equity-premium %N 2 %P 313-332 %R http://dx.doi.org/10.1016/j.jfineco.2011.02.019 %T Time-Varying Rare Disaster Risk and Stock Returns %U http://www.sciencedirect.com/science/article/pii/S0304405X11000523 %V 101 %X This study provides empirical support for theoretical models that allow for time-varying rare disaster risk. Using a database of 447 international political crises during the period 1918–2006, we create a crisis index that shows substantial variation over time. Changes in this crisis index, our proxy for changes in perceived disaster probability, have a large impact on both the mean and volatility of world stock market returns. Crisis risk is positively correlated with the earnings–price ratio and the dividend yield. Cross-sectional tests also show that crisis risk is priced: Industries that are more crisis risk sensitive yield higher returns.

@article{Berkman:JFE:2011, abstract = {This study provides empirical support for theoretical models that allow for time-varying rare disaster risk. Using a database of 447 international political crises during the period 1918–2006, we create a crisis index that shows substantial variation over time. Changes in this crisis index, our proxy for changes in perceived disaster probability, have a large impact on both the mean and volatility of world stock market returns. Crisis risk is positively correlated with the earnings–price ratio and the dividend yield. Cross-sectional tests also show that crisis risk is priced: Industries that are more crisis risk sensitive yield higher returns. }, added-at = {2014-10-12T19:53:21.000+0200}, author = {Berkman, Henk and Jacobsen, Ben and Lee, John B.}, biburl = {https://www.bibsonomy.org/bibtex/2a2985c09624dd294df1aeec49c6841e7/fcqms}, description = {Time-varying rare disaster risk and stock returns}, doi = {http://dx.doi.org/10.1016/j.jfineco.2011.02.019}, interhash = {0cfc850fdf85554004b5c4884f53c10a}, intrahash = {a2985c09624dd294df1aeec49c6841e7}, issn = {0304-405X}, journal = {Journal of Financial Economics }, keywords = {disaster equity-premium}, number = 2, pages = {313-332}, timestamp = {2014-10-12T21:38:20.000+0200}, title = {Time-Varying Rare Disaster Risk and Stock Returns }, url = {http://www.sciencedirect.com/science/article/pii/S0304405X11000523}, volume = 101, year = 2011 }