Modeling the risk premium in the Russian stock market considering the asymmetry effect

Juri Trifonov ()
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Juri Trifonov: HSE University, Moscow, Russian Federation

Applied Econometrics, 2023, vol. 71, 5-19

Abstract: The study examines the risk premium modeling for three major Russian stock market indices. The key feature is accounting for the asymmetry effect in the risk premium via the asymmetric GARCH-M model. The empirical analysis provided evidence favoring a significant leverage effect in the risk premium in the Russian market. However, the effect sign is contrary to the hypothesis and the empirical evidence in the American market. These findings are probably explained by the violation of the efficient market hypothesis and the presence of a high proportion of irrational investors in the Russian stock market.

Keywords: GARCH-M; risk premium; leverage effect; conditional volatility. (search for similar items in EconPapers)
JEL-codes: C18 C22 C58 (search for similar items in EconPapers)
Date: 2023
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