Search results for "Risk return"
showing 2 items of 2 documents
Robustness of the risk–return relationship in the U.S. stock market
2008
Abstract Using GARCH-in-Mean models, we study the robustness of the risk–return relationship in monthly U.S. stock market returns (1928:1–2004:12) with respect to the specification of the conditional mean equation. The issue is important because in this commonly used framework, unnecessarily including an intercept is known to distort conclusions. The existence of the relationship is relatively robust, but its strength depends on the prior belief concerning the intercept. The latter applies in particular to the first half of the sample, where also the coefficient of the relative risk aversion is smaller and the equity premium greater than in the latter half.
Why Is It So Difficult to Uncover the Risk-Return Tradeoff in Stock Returns?
2006
The low power of the standard Wald test in a GARCH-in-Mean model with an unnecessary intercept is shown to explain the apparent absence of a risk-return tradeoff in stocks. The importance of this finding is illustrated with monthly U.S. data. (c) 2006 Elsevier B.V. All rights reserved.