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  5. The non-linear trade-off between return and risk: a regime-switching multi-factor framework
 
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The non-linear trade-off between return and risk: a regime-switching multi-factor framework

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Author(s)
Cotter, John 
Salvador, Enrique 
Uri
http://hdl.handle.net/10197/6573
Date Issued
October 2014
Date Available
19T16:23:49Z May 2015
Abstract
This study develops a multi-factor framework where not only market risk is considered but also potential changes in the investment opportunity set. Although previous studies find no clear evidence about a positive and significant relation between return and risk, favourable evidence can be obtained if a non-linear relation is pursued. The positive and significant risk-return trade-off is essentially observed during low volatility periods. However, this relationship is not obtained during periods of high volatility. Also, different patterns for the risk premium dynamics in low and high volatility periods are obtained both in prices of risk and market risk dynamics.  
Sponsorship
Irish Research Council
Science Foundation Ireland
Other Sponsorship
Ministerio de Educación y Ciencia
Type of Material
Working Paper
Publisher
University College Dublin. Geary Institute
Start Page
1
End Page
40
Series
UCD Geary Institute Discussion Paper Series
WP2014/14
Keywords
  • Non-linear risk-retur...

  • Pro-cyclical risk ave...

  • Regime Switching GARC...

  • Multi-factor model

  • Risk premium

Classification
G10
G12
G15
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
https://creativecommons.org/licenses/by-nc-nd/3.0/ie/
Owning collection
Geary Institute Working Papers
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