Risk-return trade-off for European stock markets

Nektarios Aslanidis, Charlotte Christiansen and Christos Savva ()

International Review of Financial Analysis, 2016, vol. 46, issue C, 84-103

Abstract: This paper adopts factor models with macro-finance predictors to test the intertemporal risk-return relation for 13 European stock markets from 1986 to 2012. We use country specific, euro area, and US macro-finance factors to determine the conditional volatility and conditional return. We find that the risk-return trade-off is generally negative. The Markov switching model documents that there is time-variation in this trade-off that is linked to the state of the economy, but not the business cycles. Quantile regressions show that the risk-return trade-off is stronger at the lowest quantile of the conditional return.

Keywords: European stock markets; Factor model; Macro-finance predictors; Markov switching model; Quantile regressions; Risk-return trade-off (search for similar items in EconPapers)
JEL-codes: C22 G11 G12 G15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521916300485
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Risk-Return Trade-Off for European Stock Markets (2015)
Working Paper: Risk-Return Trade-Off for European Stock Markets (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:46:y:2016:i:c:p:84-103

DOI: 10.1016/j.irfa.2016.03.018

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().