Further evidence for the negative relationship between stock returns and volatility

Jeong-Ryeol Kurz-Kim

Applied Economics Letters, 2009, vol. 16, issue 13, 1295-1300

Abstract: Using a simple autoregression with exogenous variables (and its transformed error-correction model), we investigate relationships between realized return and risk measured by realized volatility. The empirical results obtained from analysing the German Stock Index (DAX) and the Dow Jones Index (DJ) show a negative relationship between the realized return and risk and also between changes of the realized return and risk for both monthly and quarterly frequencies. There is also some weak evidence of a negative impact of large volatility on changes of the return that can be detected.

Date: 2009
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DOI: 10.1080/17446540802481854

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