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A0212
Title: The risk return relationship: Evidence from index return and realised variance series Authors:  Minxian Yang - The University of New South Wales (Australia) [presenting]
Abstract: The risk return relationship is analysed in bivariate models for return and realised variance (RV) series. Based on daily time series from 21 international market indices for more than 13 years (January 2000 to February 2013), the empirical findings support the arguments of risk return tradeoff, volatility feedback and statistical balance. It is argued that the empirical risk return relationship is primarily shaped by two important data features: the negative contemporaneous correlation between the return and RV, and the difference in the autocorrelation structures of the return and RV. The findings do not support the risk premium effect of the shock to volatility as documented by recent studies that do not take into account of the contemporaneous correlation.