Risk-Return Trade-Off for European Stock Markets
Copyright policy )Risk-Return Trade-Off for European Stock Markets
This paper adopts dynamic factor models with macro-finance predictors to test the intertemporal risk-return relation for 13 European stock markets. We identify country specific, euro area, and global macro-finance factors to determine the conditional risk and return. Empirically, the risk- return trade-off is generally negative. However, a Markov switching model documents that there is time-variation in this trade-off that is linked to the state of the economy. Keywords: Risk-return trade-off; Dynamic factor model; Macro-finance predictors; European stock markets; Markov switching model JEL Classifications: C22; G11; G12; G17
- Aarhus University Denmark
- Universitat Rovira i Virgili Spain
- Cyprus University of Technology Cyprus
Quantile regressions, Risk-return trade-off, Social Sciences, 336, European stock markets, Finances -- Models economètrics, Factor model, 336 - Finances. Banca. Moneda. Borsa, Markov switching model, Macro-finance predictors, Economics and Business, Risk-return trade-off, Dynamic factor model, Markov switching, Macro- nance predictors, Higher order moments, Gestió de cartera, Mercats financers -- Europa
Quantile regressions, Risk-return trade-off, Social Sciences, 336, European stock markets, Finances -- Models economètrics, Factor model, 336 - Finances. Banca. Moneda. Borsa, Markov switching model, Macro-finance predictors, Economics and Business, Risk-return trade-off, Dynamic factor model, Markov switching, Macro- nance predictors, Higher order moments, Gestió de cartera, Mercats financers -- Europa
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