Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/239665
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 14 [Issue:] 6 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-14
Publisher: 
MDPI, Basel
Abstract: 
We investigate the risk-return trade-off on the US and European stock markets. We investigate the non-linear risk-return trade-off with a special eye to the tails of the stock returns using quantile regressions. We first consider the US stock market portfolio. We find that the risk-return trade-off is significantly positive at the upper tail (0.9 quantile), where the upper tail is large positive excess returns. The positive trade-off is as expected from asset pricing models. For the lower tail (0.1 quantile), that is for large negative stock returns, the trade-off is significantly negative. Additionally, for the median (0.5 quantile), the risk-return trade-off is insignificant. These results are recovered for the US industry portfolios and for Eurozone stock market portfolios.
Subjects: 
quantile regressions
risk-return trade-off
stock markets
VIX
JEL: 
C22
G12
G15
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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