An empirical investigation of risk-return relations in Chinese equity markets: Evidence from aggregate and sectoral data

This paper investigates the risk-return relations in Chinese equity markets. Based on a TARCH-M model, evidence shows that stock returns are positively correlated with predictable volatility, supporting the risk-return relation in both aggregate and sectoral markets. Evidence finds a positive relati...

Full description

Saved in:
Bibliographic Details
Published inInternational journal of financial studies Vol. 6; no. 2; pp. 1 - 22
Main Authors Chiang, Thomas C, Zhang, Yuanqing
Format Journal Article
LanguageEnglish
Published Basel MDPI 01.06.2018
MDPI AG
Subjects
Capital assets
CAPM
Chinese stock market
downside risk
Economic crisis
Economic models
Economics
GARCH-M
illiquidity
Institutional investments
Merton, Robert C
Quantitative analysis
Rates of return
Researchers
Reserve assets
Risk assessment
Securities markets
Stock exchanges
stock return
VaR
Variables
Volatility
Hong Kong China
Beijing China
Bali Indonesia
United States > US
China
Indonesia
Online AccessGet full text

Cover

More Information
Summary:This paper investigates the risk-return relations in Chinese equity markets. Based on a TARCH-M model, evidence shows that stock returns are positively correlated with predictable volatility, supporting the risk-return relation in both aggregate and sectoral markets. Evidence finds a positive relation between stock return and intertemporal downside risk, while controlling for sentiment and liquidity. This study suggests that the U.S. stress risk or the world downside risk should be priced into the Chinese stocks. The paper concludes that the risk-return tradeoff is present in the GARCH-in-mean, local downside risk-return, and global risk-return relations.
ISSN:2227-7072
2227-7072
DOI:10.3390/ijfs6020035