College of Business

Conditional asset pricing models within the risk-return literature describe a relation between expected risk and return for period t+1, with expectations formed during period t. Existing risk estimates in the literature are formed using backwards looking measures during period t, which are projected forward for period t+1. Evidence suggests ex post observations do not always correspond with conditional ex ante expectations. Using forward looking survey data, I compare measures of expected risk, with common estimates of risk in the literature. Supporting empirical research, I find a strong relation between forward looking investor risk perceptions and conditional risk estimates.