The long-run risk premium in the intertemporal CAPM: International evidence

Abstract

This study investigates whether long-run conditional covariance risk is linked to expected returns in the Intertemporal CAPM framework. We observe that the long-run value risk is positively associated with the expected returns on the global portfolios excluding the US. We also find that the long-run momentum risk is negatively related to the expected returns. In contrast, the long-run market risk is not associated with them, due to the low covariance variation across portfolios. Finally, we uncover that the long-run value premiums were strong for the global and European portfolios before the COVID-19 pandemic.