Revisiting the relationship between risk and return
Document Type
Article
Source of Publication
Review of Quantitative Finance and Accounting
Publication Date
1-1-2013
Abstract
© 2013, Springer Science+Business Media New York. The literature on the fundamental relationship between risk and return is largely inconclusive. We show that accounting for structural breaks and utilizing a large sample is required for correctly estimating this risk-return tradeoff within the GARCH framework. The above two factors affect the risk-return tradeoff via volatility persistence, a parameter totally ignored in the current debate. We show this with the help of Monte Carlo simulations and then validate our results empirically using US stock market data. The results have important economic implications and will help in resolving some inconsistencies in the literature.
DOI Link
ISSN
Publisher
Springer Science and Business Media, LLC
Volume
44
Issue
1
First Page
25
Last Page
40
Disciplines
Business
Keywords
GARCH, Risk, Structural breaks, Volatility
Scopus ID
Recommended Citation
Malik, Farooq, "Revisiting the relationship between risk and return" (2013). All Works. 2981.
https://zuscholars.zu.ac.ae/works/2981
Indexed in Scopus
yes
Open Access
no