Resumen de The risk free rate and the relation volatility-market risk premium
Juan M. Nave Pineda, Alicia de las Heras, Gregorio Serna
In this work we analyse the informative capability of the risk free rate to predict the market risk premium and the relation with its volatility. We compare alternative models with conditional variance, estimated using daily data from Spanish Equity and Public Debt Markets. Our results show a negative relationship between the risk free rate and the market conditional variance. Moreover, we find that the inclusion of the risk free rate improves the predictive power of the model.
