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Modeling the risk premium in the Russian stock market considering the asymmetry effect

Author

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  • Trifonov, Juri

    (HSE University, Moscow, Russian Federation)

Abstract

The study examines the risk premium modeling for three major Russian stock market indices. The key feature is accounting for the asymmetry effect in the risk premium via the asymmetric GARCH-M model. The empirical analysis provided evidence favoring a significant leverage effect in the risk premium in the Russian market. However, the effect sign is contrary to the hypothesis and the empirical evidence in the American market. These findings are probably explained by the violation of the efficient market hypothesis and the presence of a high proportion of irrational investors in the Russian stock market.

Suggested Citation

  • Trifonov, Juri, 2023. "Modeling the risk premium in the Russian stock market considering the asymmetry effect," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 71, pages 5-19.
    • Handle: RePEc:ris:apltrx:0475
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    References listed on IDEAS

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    More about this item

    Keywords

    GARCH-M; risk premium; leverage effect; conditional volatility.;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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