The Intertemporal Relationship between Risk and Return: A Panel Quantile Regression Approach
Resource
經濟論文叢刊, 43(3), 297-331
Journal
經濟論文叢刊
Journal Volume
43
Journal Issue
3
Pages
297-331
Date Issued
2015-09
Date
2015-09
Author(s)
Chen, J.E.
Lin, K.F.
Abstract
This paper explores intertemporal relationship between risk and expected returns in the Taiwan stock market in the context of the Intertemporal Capital Asset Pricing Model. We first estimate the time-varying conditional covariances by dynamic conditional correlations models, and then treat the estimates as explanatory variables in a second-stage panel quantile regression to explore the shape of the conditional distribution of excess returns. A significant positive intertemporal relation between risk and return is identified at the conditional mean and median of the expected return distribution. This positive risk-return relation coincides with the result implied by interactive-effects panel data models and fits into the conditional expectation framework of the ICAPM allowing for cross-sectional dependence. Robustness checks indicate that our empirical results are robust to the choice of proxies of risk, explanatory variables, and econometric methodologies.
Subjects
風險與預期報酬跨期關係, 跨期資本資產定價模型, 動態條件相關模型, 交互效果追蹤資料模型, 追蹤資料分量迴歸
ntertemporal relation between risk and expected return, ICAPM, dynamic conditional correlations, interactive-effects
Type
journal article