Risk-Return Trade-Off for European Stock Markets

Nektarios Aslanidis, Charlotte Christiansen and Christos Savva ()

Working Papers from Universitat Rovira i Virgili, Department of Economics

Abstract: This paper adopts dynamic factor models with macro-finance predictors to test the intertemporal risk-return relation for 13 European stock markets. We identify country specific, euro area, and global macro-finance factors to determine the conditional risk and return. Empirically, the risk- return trade-off is generally negative. However, a Markov switching model documents that there is time-variation in this trade-off that is linked to the state of the economy. Keywords: Risk-return trade-off; Dynamic factor model; Macro-finance predictors; European stock markets; Markov switching model JEL Classifications: C22; G11; G12; G17

Keywords: Mercats financers -- Europa; Finances -- Models economètrics; Gestió de cartera; 336 - Finances. Banca. Moneda. Borsa (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-eec, nep-fmk and nep-rmg
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http://hdl.handle.net/2072/246967

Related works:
Journal Article: Risk-return trade-off for European stock markets (2016)
Working Paper: Risk-Return Trade-Off for European Stock Markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:urv:wpaper:2072/246967

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