The Relation Between Risk Premium on Financial Markets and Macroeconomic Factors

It is crucial for modern economic science to understand the true relationship between macroeconomic indicators and the financial markets. This is important for macroeconomists, as many models of modern economy are based on the premise of the existence of efficient capital markets, promoting the distribution of savings the most efficient manner, and for the financiers, as macroeconomic changes are the cause of global changes in the markets. However, the construction of adequate pricing models in financial markets involves a number of difficulties due to both the nature of markets, which are exposed to a variety of factors and volatility of macroeconomic indicators themselves. This paper attempts to fill a gap in the current literature related to the volatility of the economy as a whole. To this end the model of pricing on the financial markets was choosen, which has been estimated taking into account the global changes in the macro-economic indicators, called the Great moderation. The conclusions derived from this model correctly predicts the relative changes in asset prices and risk premium required by investors. However, the absolute predictions of the model are very different from the actual observed data, especially in the period from the 1990s to the present day. One reason for this may be a market overvaluation, as evidenced by some researchers. But despite some differences with reality, this work gives encouraging results, the development of which in subsequent studies may lead to a better understanding of market pricing mechanisms.