The return on the market portfolio plays a central role in the capital asset pricing model (CAPM), the financial theory widely used by both academics and practitioners. However, the intertemporal properties of the stock market return are not yet fully understood. In particular, ther is an ongoing debate in the literature about the relationship between market risk and return and the extent to which stock market volatility moves stock prices. This paper provides new evidence on the risk-return relation by estimating a variant of Merton's (1983) intertemporal capital asset pricing model (ICAPM).