Risk–return relationship and individualism

Sung Won Seo, Jiseob Kim and Jun Sik Kim

Applied Economics Letters, 2022, vol. 29, issue 8, 760-766

Abstract: This paper investigates the impact of individualism on risk–return relationship across countries. In theory, return is expected to have a positive relation with risk. However, we find an insignificant relation between the stock market’s return and the market’s conditional variance. Our empirical evidence also suggests that higher individualism weakens the relationship between return and variance. These findings are consistent with the investors in highly individualistic countries who are overoptimism or overconfident with risk mis-estimations.

Date: 2022
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DOI: 10.1080/13504851.2021.1885604

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