Stock Returns and Risk: Evidence from Quantile
Thomas C. Chiang () and
Jiandong Li ()
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Thomas C. Chiang: Department of Finance, Drexel University, 33rd and Chestnut Streets, Philadelphia, PA 19104, USA
Jiandong Li: Chinese Academy of Finance and Development (CAFD), Central University of Finance and Economics (CUFE), China
Journal of Risk and Financial Management, 2012, vol. 5, issue 1, 1-39
This paper employs weighted least squares to examine the risk-return relation by applying high-frequency data from four major stock indexes in the US market and finds some evidence in favor of a positive relation between the mean of the excess returns and expected risk. However, by using quantile regressions, we find that the risk-return relation moves from negative to positive as the returns’ quantile increases. A positive risk-return relation is valid only in the upper quantiles. The evidence also suggests that intraday skewness plays a dominant role in explaining the variations of excess returns.
Keywords: Risk-return tradeoff; Volatility; Intraday skewness; Quantile Regression; High-frequency data (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:5:y:2012:i:1:p:20-58:d:28408
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