A Framework for Exploring the Macroeconomic Determinants of Systematic Risk


The increasing availability of high-frequency asset return data has had a fundamental impact on empirical financial economics, focusing attention on asset return volatility and correlation dynamics, with key applications in portfolio and risk management. So-called "realized" volatilities and correlations have featured prominently in the recent literature, and numerous studies have provided direct characterizations of the unconditional and conditional distributions of realized volatilities and correlations across different assets, asset classes, countries, and sample periods. For overviews see Andersen et al. (2005a, b). In this paper we selectively survey, unify and extend that literature. Rather than focusing exclusively on characterization of the properties of realized volatility, we progress by examining economically interesting functions of realized volatility, namely, realized betas for equity portfolios, relating them both to their underlying realized variance and covariance parts and to underlying macroeconomic fundamentals.







Tim Bollerslev

Juanita and Clifton Kreps Distinguished Professor of Economics, in Trinity College of Arts and Sciences

Professor Bollerslev conducts research in the areas of time-series econometrics, financial econometrics, and empirical asset pricing finance. He is particularly well known for his developments of econometric models and procedures for analyzing and forecasting financial market volatility. Much of Bollerslev’s recent research has focused on the analysis of newly available high-frequency intraday, or tick-by-tick, financial data and so-called realized volatility measures, macroeconomic news announcement effects, and the pricing of volatility risk. Recent reviews of his work are available in the two Handbook chapters "Volatility and Correlation Forecasting” (with Torben G. Andersen, Peter Christoffersen and Francis X. Diebold), Handbook of Economic Forecasting, (eds. Graham Elliott, Clive W.J. Granger and Allan Timmermann), 2006, and "Parametric and Nonparametric Volatility Measurement” (with Torben G. Andersen and Francis X. Diebold), in Handbook of Financial Econometrics, (eds. Yacine Aït-Sahalia and Lars P. Hansen), 2009.


Michael W. Brandt

Kalman J. Cohen Distinguished Professor of Business Administration

Professor Brandt conducts empirical and theoretical research in finance. His current work focuses on real-time processing of macroeconomic data by financial markets. He also works on quantitative portfolio management, risk management, currency and fixed income markets, and financial econometrics. Professor Brandt's research has appeared in leading academic journals, including the American Economic Review, Journal of Business, Journal or Finance, Journal of Financial Economics, Journal of Monetary Economics, and Review of Financial Studies. He served as co-editor of the Review of Finance, the official journal of the European Finance Association, and as associate editor of the Journal of Finance, the official journal of the American Finance Association. He is a Faculty Research Associate of the National Bureau of Economic Research (NBER). Prior to joining Fuqua in 2003, Professor Brandt was at the Wharton School of the University of Pennsylvania for six years.

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