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The Risk Return Relationship: Evidence from Index Return and Realised Variance Series

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  • Minxian Yang

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    (School of Economics, Australian School of Business, the University of New South Wales)

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    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 reasoned 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.

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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2014-16.pdf
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    Bibliographic Info

    Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2014-16.

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    Length: 32 pages
    Date of creation: Mar 2014
    Date of revision:
    Handle: RePEc:swe:wpaper:2014-16

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    Keywords: risk premium; volatility feedback; return predictability; realised variance model; statistical balance;

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