The intertemporal risk-return relationship: Evidence from international markets

Thomas C. Chiang, Huimin Li and Dazhi Zheng

Journal of International Financial Markets, Institutions and Money, 2015, vol. 39, issue C, 156-180

Abstract: This paper examines the intertemporal capital asset pricing (Merton, 1973) for industry portfolio returns of 14 international markets. Using different multivariate GARCH models to estimate time-varying conditional covariances between industry excess returns and market excess returns by controlling for financial market volatility variables and the Fama–French–Carhart factors, we find positive evidence to support the tradeoff between industry excess return and the covariance risk for all advanced markets (except Germany), all Asian markets, and Argentina in Latin American markets. The evidence suggests that the positive risk-return relationship is more pronounced during the tranquil period.

Keywords: Intertemporal capital asset pricing; Bivariate GARCH models; International stock markets; Risk-return tradeoff; Downside risk (search for similar items in EconPapers)
JEL-codes: G01 G12 G15 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:39:y:2015:i:c:p:156-180

DOI: 10.1016/j.intfin.2015.06.003

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