Market states and the risk-return tradeoff
Zijun Wang and
M. Moosa Khan
The Quarterly Review of Economics and Finance, 2017, vol. 65, issue C, 314-327
We re-examine the risk-return tradeoff in the U.S. equity market by allowing for time variation in the tradeoff and estimating conditional variance by the new mixed data sampling method. The main finding is that the risk-return tradeoff is strongly time-varying with the state of the market and the average of the time-varying tradeoff estimates is 1.43. The lagged market return is found to be the best indicator of market states. The empirical finding holds true for a battery of robustness checks during the post-Compustat sample period. The evidence from the international markets is similar to the U.S. one.
Keywords: Risk-return tradeoff; Time variation; Market states; Mixed data sampling (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:65:y:2017:i:c:p:314-327
Access Statistics for this article
The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty
More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().