Is the Effect of Risk on Stock Returns Different in Up and Down Markets? A Multi-Country Study

Srikanta Kundu; Nityananda Sarkar

doi:https://doi.org/10.33818/ier.278045

Makale detayları

Is the Effect of Risk on Stock Returns Different in Up and Down Markets? A Multi-Country Study

Yazarlar:

Srikanta Kundu | Nityananda Sarkar

Yayıncı:

Econometric Research Association

Ana Başlıklar:

Sosyoloji & antropoloji | Yönetim

Dergi:

International Econometric Review 2016 Vol.8 Issue 2, pp.53-71

Belge Tipi:

Makale

Yayın Tarihi:

9/2016

Belge Dili:

Türkçe

Document ID (Org No.):

2000717667

Sıklık:

Üç Aylık

eISSN:

1308-8815

pISSN:

1308-8793

DOI:

https://doi.org/10.33818/ier.278045

Özet:

 

Several empirical studies in finance have examined whether or not the risk associated with any stock market responds differently in two different states of the stock market,  especially in bull and bear markets. This paper studies this problem in the modelling framework, where (i) the conditional mean specification considers threshold  autoregressive model for two market situations characterized as up and down markets, (ii) the conditional variance (as a measure of time-varying risk) specification is asymmetric  in the sense of capturing leverage effect, and (iii) the conditional variance directly affects the conditional mean through the risk premium term in the risk-return relationship. Using  daily returns on stock indices of eight countries, comprising four developed countries - the USA, the UK, Hong Kong, Japan - and four important emerging economies, called  the BRIC group of countries viz., Brazil, Russia, India and China, we have found that the nature of risk-return relationship is different in up and down markets. Furthermore, the  risk aversion parameter, which is significant in most of the countries, is positive in the down markets and negative in the up markets. This finding supports the hypothesis of  Fabozzi and Francis (1977) and Kim and Zumwalt (1979), namely, that investors require a premium for taking downside risk and pay a premium for upside variation; moreover,  the findings confirm that the nature of risk-return relationship is same for the two groups of countries.

Makale detayları

Is the Effect of Risk on Stock Returns Different in Up and Down Markets? A Multi-Country Study

Yazarlar: Srikanta Kundu | Nityananda Sarkar

Yayıncı: Econometric Research Association

Ana Başlıklar: Sosyoloji & antropoloji | Yönetim

Dergi: International Econometric Review 2016 Vol.8 Issue 2, pp.53-71

Belge Tipi: Makale

Yayın Tarihi: 9/2016

Belge Dili: Türkçe

Document ID (Org No.): 2000717667

Sıklık: Üç Aylık

eISSN: 1308-8815

pISSN: 1308-8793

DOI: https://doi.org/10.33818/ier.278045

Sayı

Yazarlar:

Srikanta Kundu | Nityananda Sarkar

Yayıncı:

Econometric Research Association

Ana Başlıklar:

Sosyoloji & antropoloji | Yönetim

Dergi:

International Econometric Review 2016 Vol.8 Issue 2, pp.53-71

Belge Tipi:

Makale

Yayın Tarihi:

9/2016

Belge Dili:

Türkçe

Document ID (Org No.):

2000717667

Sıklık:

Üç Aylık

eISSN:

1308-8815

pISSN:

1308-8793

DOI:

https://doi.org/10.33818/ier.278045