Factor Models of Asset Returns and Bear Market Risk

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Model reveals variations in risk premia for asset returns across states, indicating implications for investment strategy.

Good and bad states of the world significantly influence risk premia in asset returns, enhancing financial models.
Risk premia for asset returns were successfully estimated showing differentiation across market conditions.
Conditional estimation approach was applied to a broad cross-section of stock portfolio excess returns.
This model may inform investment strategies, distinguishing between different market environments.

Massacci et al. (2025) studied this question.

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