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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