Is there a risk-return trade-off? Evidences from Chinese stock markets

Dongmin Kong, Hening Liu () and Le Wang
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Dongmin Kong: Department of Finance, Huazhong University of Science and Technology, Wuhan 430074, China
Hening Liu: Department of Economics, Northern Illinois University, Dekalb, IL 60115, US

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2008, vol. 3, issue 1, 1-14

Abstract: Employing a recently developed method-mixed data sampling (MIDAS) approach - to assess the risk-return trade-off for Chinese stock markets, our results are striking. First, we fail to find any evidence of the risk-return trade-off in the first subsample (Jan 1993¨CJan 2001), while we do find the existence of such relationship in the second subsample (Feb 2001¨CDec 2005); such results suggest that as the markets become more mature, risks are compensated more properly. Second, we also compare the MIDAS results with the results obtained from conventional approaches such as the GARCH-type model. Our results are reasonably robust to the methods that we use, and the MIDAS and GARCH-type approaches outperform rolling-window approach in terms of modeling volatility.

Keywords: risk-return trade-off; MIDAS; Chinese stock markets (search for similar items in EconPapers)
JEL-codes: C22 G12 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (4)

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