Univrsity Of Tehran Press Financial Research Journal 1024-8153 17 1 2015 03 21 The intertemporal relationship between risk and return with dynamic conditional correlation and time -varying beta The intertemporal relationship between risk and return with dynamic conditional correlation and time -varying beta 1 20 51914 10.22059/jfr.2015.51914 FA Hojjatollah Bagherzadeh Ph.D., Financial Economics, University of Tehran, Iran Ali Asghar Salem Assistant Prof., Economics Department, Allameh Tabatabaee University, Tehran, Iran Journal Article 2014 02 07 The current paper examines intertemporal capital asset pricing model in Iran’s Stock Market. Dynamic conditional correlation was used to estimate conditional variance and covariance portfolios with market returns. Time varying beta is estimated by Kalman Filter method. Based on the obtained results, risk aversion coefficients were between 0.013 and 0.28 and the average was 0.20. Significance of risk aversion and insignificance of intercepts revealed that there is ICAPM in Iran’s Stock Market.  The result also showed that assets with high correlation with market conditional volatilities have low expected returns in the next transaction period. In addition, assets having high correlation with exchange rate growth are induced by additional risk premium in exchange rate risks and will have high expected returns in the next transaction period. The current paper examines intertemporal capital asset pricing model in Iran’s Stock Market. Dynamic conditional correlation was used to estimate conditional variance and covariance portfolios with market returns. Time varying beta is estimated by Kalman Filter method. Based on the obtained results, risk aversion coefficients were between 0.013 and 0.28 and the average was 0.20. Significance of risk aversion and insignificance of intercepts revealed that there is ICAPM in Iran’s Stock Market.  The result also showed that assets with high correlation with market conditional volatilities have low expected returns in the next transaction period. In addition, assets having high correlation with exchange rate growth are induced by additional risk premium in exchange rate risks and will have high expected returns in the next transaction period. https://jfr.ut.ac.ir/article_51914_4b20b908cb8caebf3dfa7bc6485f4e25.pdf