Risk Pricing

Do We Price Happiness? Evidence from Korean Stock Market ArXiv ID: 2308.10039 “View on arXiv” Authors: Unknown Abstract This study explores the potential of internet search volume data, specifically Google Trends, as an indicator for cross-sectional stock returns. Unlike previous studies, our research specifically investigates the search volume of the topic ‘happiness’ and its impact on stock returns in the aspect of risk pricing rather than as sentiment measurement. Empirical results indicate that this ‘happiness’ search exposure (HSE) can explain future returns, particularly for big and value firms. This suggests that HSE might be a reflection of a firm’s ability to produce goods or services that meet societal utility needs. Our findings have significant implications for institutional investors seeking to leverage HSE-based strategies for outperformance. Additionally, our research suggests that, when selected judiciously, some search topics on Google Trends can be related to risks that impact stock prices. ...

Equity Risk Premiums (ERP): Determinants, Estimation, and Implications – The 2021 Edition ArXiv ID: ssrn-3825823 “View on arXiv” Authors: Unknown Abstract The equity risk premium is the price of risk in equity markets, and it is not just a key input in estimating costs of equity and capital in both corporate finan Keywords: equity risk premium, cost of equity, capital asset pricing model, valuation, risk pricing, Equities Complexity vs Empirical Score Math Complexity: 2.5/10 Empirical Rigor: 7.0/10 Quadrant: Street Traders Why: The paper uses foundational finance equations (CAPM, multi-factor models) with minimal advanced derivation, placing math complexity low. However, it heavily relies on historical data, surveys, and real-world market data (default spreads, option prices) to estimate and compare equity risk premiums, making it highly empirical and implementation-focused. flowchart TD A["Research Goal: Determine ERP<br>for Corporate Valuation"] --> B["Key Methodology: Historical Analysis"] B --> C["Data Inputs: Historical<br>Stock Returns vs<br>Risk-Free Rates"] C --> D["Computational Process:<br>Calculate Average Historical ERP<br>& Adjust for Market Conditions"] D --> E["Key Findings: ERP is unstable<br>Context-dependent; Required for<br>accurate Cost of Equity &<br>Valuation models"]