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The Risk-Return Trade-Off in Emerging Markets

Author

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  • Enrique Salvador

Abstract

This paper studies the risk-return trade-off in some of the main emerging stock markets in the world. Although previous studies on emerging markets were not able to show a positive and significant trade-off, favorable evidence can be obtained if a nonlinear framework between return and risk is considered. Using fifteen years of weekly data observations for twenty-five emerging markets Morgan Stanley Capital International indexes in a regime-switching GARCH framework, the author obtains favorable evidence for most of the emerging markets during low volatility periods, but not for periods of financial turmoil or using the traditional linear GARCH-M approach.

Suggested Citation

  • Enrique Salvador, 2012. "The Risk-Return Trade-Off in Emerging Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(6), pages 106-128, November.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:6:p:106-128
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    Citations

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    Cited by:

    1. Bejaoui, Azza & Karaa, Adel, 2016. "Revisiting the bull and bear markets notions in the Tunisian stock market: New evidence from multi-state duration-dependence Markov-switching models," Economic Modelling, Elsevier, vol. 59(C), pages 529-545.
    2. Naqi Shah, Sadia & Qayyum, Abdul, 2016. "Analyse Risk-Return Paradox: Evidence from Electricity Sector of Pakistan," MPRA Paper 68783, University Library of Munich, Germany.
    3. Liu, Xiaochun, 2017. "Unfolded risk-return trade-offs and links to Macroeconomic Dynamics," Journal of Banking & Finance, Elsevier, vol. 82(C), pages 1-19.
    4. Tan, Zhengxun & Xiao, Binuo & Huang, Yilong & Zhou, Li, 2021. "Value at risk and return in Chinese and the US stock markets: Double long memory and fractional cointegration," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
    5. Jin Woo Won & Wooyong Jung & Seung Heon Han & Sungmin Yun & Bonsang Koo, 2019. "What Enables a High-Risk Project to Yield High Return from a Construction Contractor’s Perspective?," Sustainability, MDPI, vol. 11(21), pages 1-17, October.

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