Risk premium, macroeconomic shocks, and information technology: an empirical analysis

Pekka Mannonen, Elias Oikarinen

Research output: Contribution to journalArticleScientificpeer-review


This study empirically identifies the impact of various macroeconomic factors on the default risk premium. Using monthly data for the period 1970–2010 for the US, our estimations indicate that the monetary policy aggregates, risk-free interest rate, term structure of interest rates, inflation, and the state of the business cycle influence the risk premium. The results also provide some evidence in support of the hypothesis that the development of information technology has had a decreasing impact on the risk premium. As expected, various financial crises have had substantial and long-lasting effects on the premium. The results suggest that the direct impact of the subprime crisis and Lehman’s collapse on the risk premium was as large as two and a half percentage-points for a sustainable period. Foreign financial crises, in turn, have lowered the risk premium in the US market, suggesting a flight-to-safety phenomenon.
Original languageEnglish
Pages (from-to)695-705
Number of pages11
Issue number5
Publication statusPublished - 1 Sep 2013
MoE publication typeA1 Journal article-refereed


  • risk premium
  • financial crisis
  • financial accelerator
  • information technology
  • flight-to-safety
  • fully modified OLS


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