Risk and Return

摘要

The aim of this editorial is to open discussion again regarding the risk-return relationship in stock market data. While this editorial will not reach any definitive conclusion it is hoped that the results presented here will stimulate future debate and continuing work. The risk return trade-off is a fundamental relationship in finance. It suggests that the expected return is positively related to volatility, often proxied using the conditional variance estimated from a GARCH-M model. However the empirical evidence based, which is typically based on index return series is mixed. A brief glance at the literature reveals that a positive relationship between return and risk (conditional variance) has been reported by French et al. [1], Chou [2], Campbell and Hentschel [3], Lundblad [4] and Miiller et al. [5]. However, a negative relationship is reported by Nelson [6], Glosten et al. [7] and Jensen and Lunde [8] among others.