Advanced Search
MyIDEAS: Login to save this paper or follow this series

On the Risk-Return Tradeoff in the Stock Exchange of Thailand: New Evidence

Contents:

Author Info

  • Jiranyakul, Komain

Abstract

This paper provides new evidence on the positive risk-return tradeoff in the Thai stock market using monthly data. An AR(p)-GARCH-in-mean model is applied to the data from January 1981 to December 2009. Since stock prices and dividend series are not cointegrated, the excess returns are separately calculated as capital gain and dividend excess returns. By incorporating the dummy variables that capture the impact of the 1987 global stock market crash and the Asian 1997 financial crisis in the conditional variance equations, the results show that the persistence of excess return volatility is reduced. It is also found that there exists a positive risk-return tradeoff in the stock market in both capital gain and dividend excess returns. The size of the risk-return tradeoff is higher and more highly significant when the market dividend yield is used to obtain the excess return. Therefore, dividend is more important than capital gain. In addition, the impact of volatility on excess returns is not asymmetric implying that the AR(p)-GARCH-in-mean model is sufficient to detect the positive risk-return tradeoff.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/45583/
File Function: original version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/45851/
File Function: revised version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/45890/
File Function: revised version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 45583.

as in new window
Length:
Date of creation: Jul 2011
Date of revision:
Publication status: Published in Asian Social Science 7.7(2011): pp. 115-123
Handle: RePEc:pra:mprapa:45583

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Risk-return; Emerging stock market; GARCH-M;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Xiaoquan Jiang & Bong Soo Lee, 2009. "The Intertemporal Risk-Return Relation in the Stock Market," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 44(4), pages 541-558, November.
  2. Li, Qi & Yang, Jian & Hsiao, Cheng & Chang, Young-Jae, 2005. "The relationship between stock returns and volatility in international stock markets," Journal of Empirical Finance, Elsevier, Elsevier, vol. 12(5), pages 650-665, December.
  3. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, Econometric Society, vol. 41(5), pages 867-87, September.
  4. Merton, Robert C., 1980. "On estimating the expected return on the market : An exploratory investigation," Journal of Financial Economics, Elsevier, Elsevier, vol. 8(4), pages 323-361, December.
  5. French, Kenneth R. & Schwert, G. William & Stambaugh, Robert F., 1987. "Expected stock returns and volatility," Journal of Financial Economics, Elsevier, Elsevier, vol. 19(1), pages 3-29, September.
  6. Giorgio De Santis & Selahattin Imrohoroglu, 1994. "Stock returns and volatility in emerging financial markets," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 93, Federal Reserve Bank of Minneapolis.
  7. Eric Ghysels & Pedro Santa-Clara & Rossen Valkanov, 2004. "There is a Risk-Return Tradeoff After All," CIRANO Working Papers, CIRANO 2004s-24, CIRANO.
  8. Hui Guo & Christopher J. Neely, 2006. "Investigating the intertemporal risk-return relation in international stock markets with the component GARCH model," Working Papers, Federal Reserve Bank of St. Louis 2006-006, Federal Reserve Bank of St. Louis.
  9. Hui Guo & Robert F. Whitelaw, 2003. "Uncovering the Risk-Return Relation in the Stock Market," NBER Working Papers 9927, National Bureau of Economic Research, Inc.
  10. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 307-327, April.
  11. Lamoureux, Christopher G & Lastrapes, William D, 1990. "Persistence in Variance, Structural Change, and the GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 8(2), pages 225-34, April.
  12. Campbell R. Harvey, 1994. "Predictable Risk and Returns in Emerging Markets," NBER Working Papers 4621, National Bureau of Economic Research, Inc.
  13. Chiang, Thomas C & Doong, Shuh-Chyi, 2001. " Empirical Analysis of Stock Returns and Volatility: Evidence from Seven Asian Stock Markets Based on TAR-GARCH Model," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 17(3), pages 301-18, November.
  14. Lanne, Markku & Luoto, Jani, 2008. "Robustness of the risk-return relationship in the U.S. stock market," Finance Research Letters, Elsevier, Elsevier, vol. 5(2), pages 118-127, June.
  15. Baillie, Richard T. & DeGennaro, Ramon P., 1990. "Stock Returns and Volatility," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 25(02), pages 203-214, June.
  16. Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report, Federal Reserve Bank of Minneapolis 157, Federal Reserve Bank of Minneapolis.
  17. Lanne, Markku & Saikkonen, Pentti, 2006. "Why is it so difficult to uncover the risk-return tradeoff in stock returns?," Economics Letters, Elsevier, Elsevier, vol. 92(1), pages 118-125, July.
  18. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 347-70, March.
  19. Jaeun Shin, 2005. "Stock Returns and Volatility in Emerging Stock Markets," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 4(1), pages 31-43, April.
  20. Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, Elsevier, vol. 22(1), pages 3-25, October.
  21. Guedhami, Omrane & Sy, Oumar, 2005. "Does conditional market skewness resolve the puzzling market risk-return relationship?," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 45(4-5), pages 582-598, September.
  22. Whitelaw, Robert F, 2000. "Stock Market Risk and Return: An Equilibrium Approach," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 13(3), pages 521-47.
  23. Lin Peng & Turan G. Bali, 2006. "Is there a risk-return trade-off? Evidence from high-frequency data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 21(8), pages 1169-1198.
  24. Lundblad, Christian, 2007. "The risk return tradeoff in the long run: 1836-2003," Journal of Financial Economics, Elsevier, Elsevier, vol. 85(1), pages 123-150, July.
  25. Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, Elsevier, vol. 64(1-2), pages 307-333.
  26. Malik, Farooq, 2003. "Sudden changes in variance and volatility persistence in foreign exchange markets," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 13(3), pages 217-230, July.
  27. Choudhry, Taufiq, 1996. "Stock market volatility and the crash of 1987: evidence from six emerging markets," Journal of International Money and Finance, Elsevier, Elsevier, vol. 15(6), pages 969-981, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mohanty, Roshni & P, Srinivasan, 2014. "The Time-Varying Risk and Return Trade Off in Indian Stock Markets," MPRA Paper 55660, University Library of Munich, Germany.
  2. Aeggarchat Sirisankanan, 2014. "Rethinking Thailand¡¯S Growth Policies," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 39(2), pages 51-73, June.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:45583. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.