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Stock Returns and Risk: Evidence from Quantile

Author

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  • Thomas C. Chiang

    () (Department of Finance, Drexel University, 33rd and Chestnut Streets, Philadelphia, PA 19104, USA)

  • Jiandong Li

    () (Chinese Academy of Finance and Development (CAFD), Central University of Finance and Economics (CUFE), China)

Abstract

This paper employs weighted least squares to examine the risk-return relation by applying high-frequency data from four major stock indexes in the US market and finds some evidence in favor of a positive relation between the mean of the excess returns and expected risk. However, by using quantile regressions, we find that the risk-return relation moves from negative to positive as the returns’ quantile increases. A positive risk-return relation is valid only in the upper quantiles. The evidence also suggests that intraday skewness plays a dominant role in explaining the variations of excess returns.

Suggested Citation

  • Thomas C. Chiang & Jiandong Li, 2012. "Stock Returns and Risk: Evidence from Quantile," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 5(1), pages 1-39, December.
  • Handle: RePEc:gam:jjrfmx:v:5:y:2012:i:1:p:20-58:d:28408
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    References listed on IDEAS

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    1. repec:eee:ecmode:v:64:y:2017:i:c:p:74-81 is not listed on IDEAS
    2. repec:eee:mulfin:v:42-43:y:2017:i::p:37-55 is not listed on IDEAS
    3. Zhu, Hui-Ming & Li, ZhaoLai & You, WanHai & Zeng, Zhaofa, 2015. "Revisiting the asymmetric dynamic dependence of stock returns: Evidence from a quantile autoregression model," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 142-153.
    4. Cathy W.S. Chen & Mike K.P. So & Thomas C. Chiang, 2016. "Evidence of Stock Returns and Abnormal Trading Volume: A Threshold Quantile Regression Approach," The Japanese Economic Review, Japanese Economic Association, vol. 67(1), pages 96-124, March.

    More about this item

    Keywords

    Risk-return tradeoff; Volatility; Intraday skewness; Quantile Regression; High-frequency data;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • E - Macroeconomics and Monetary Economics
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • G - Financial Economics

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