The Risk-Return Tradeoff in Emerging Markets

Posted: 26 Mar 2011

See all articles by Enrique Salvador

Enrique Salvador

Universitat Jaume I - Department of Finance and Accounting

Vicent Aragó

Jaume I University - Department of Finance and Accounting

Date Written: March 24, 2011

Abstract

This paper studies the risk-return tradeoff 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 tradeoff, favorable evidence can be obtained if a non-linear framework between return and risk is considered. However, this relationship between return and risk is essentially observed in periods of financial stability but not in times of market jitters. Using 15 years of weekly data observations in a Regime Switching-GARCH framework, I show favorable evidence in 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

Salvador, Enrique and Aragó, Vicent, The Risk-Return Tradeoff in Emerging Markets (March 24, 2011). Available at SSRN: https://ssrn.com/abstract=1794167 or http://dx.doi.org/10.2139/ssrn.1794167

Enrique Salvador (Contact Author)

Universitat Jaume I - Department of Finance and Accounting ( email )

Castellon
E-12071 Castello de la Plana, Castellón de la Plana 12071
Spain

Vicent Aragó

Jaume I University - Department of Finance and Accounting ( email )

Avda Sos Baynat s/N
Castellón, 12071
Spain

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