Article by: Kenneth R. French, G. William Schwet, Robert F. Stambaugh
Published by: Journal of Financial Economics
Date: Dec 1986
“This paper examines the relation between stock returns and stock market volatility. We find
evidence that the expected market risk premium (the expected return on a stock portfolio minus
the Treasury bill yield) is positively related to the predictable volatility of stock returns. There is
also evidence that unexpected stock market returns are negatively related to the unexpected
change in the volatility of stock returns. This negative relation provides indirect evidence of a
positive relation between expected risk premiums and volatility.”
Full article (PDF): Link