TY - JOUR
T1 - A fresh look at the risk-return tradeoff
AU - Wang, Cindy S.H.
AU - Chen, Yi Chi
AU - Lo, Hsin Yu
N1 - Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2021/9
Y1 - 2021/9
N2 - This research takes a different approach to examining the international risk-return tradeoff nexus from an econometrician's viewpoint. We study this tradeoff based on returns from 28 countries, covering a wide range of advanced and emerging markets. In contrast to the existing literature, we conduct panel data analysis that allows for cross-sectional dependence, along with the fixed-effects pooled OLS method that can produce consistent estimators. Empirical results show that the proposed approach could be a practical guide for investment portfolio, because of (i) the positive risk-return relation for both advanced and emerging economies, especially when it is associated with the business cycle, and (ii) the convincing out-of-sample forecasts by the fixed-effects pooled panel predictions.
AB - This research takes a different approach to examining the international risk-return tradeoff nexus from an econometrician's viewpoint. We study this tradeoff based on returns from 28 countries, covering a wide range of advanced and emerging markets. In contrast to the existing literature, we conduct panel data analysis that allows for cross-sectional dependence, along with the fixed-effects pooled OLS method that can produce consistent estimators. Empirical results show that the proposed approach could be a practical guide for investment portfolio, because of (i) the positive risk-return relation for both advanced and emerging economies, especially when it is associated with the business cycle, and (ii) the convincing out-of-sample forecasts by the fixed-effects pooled panel predictions.
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U2 - 10.1016/j.pacfin.2021.101546
DO - 10.1016/j.pacfin.2021.101546
M3 - Review article
AN - SCOPUS:85106571712
SN - 0927-538X
VL - 68
JO - Pacific Basin Finance Journal
JF - Pacific Basin Finance Journal
M1 - 101546
ER -