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Article

Quantile Risk–Return Trade-Off

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Department d’Economia, CREIP, Universitat Rovira i Virgili, Avinguda Universitat 1, 43204 Reus, Catalonia, Spain
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CREATES, Department of Economics and Business Economics, Aarhus University, Fuglesangs Alle 4, 8210 Aarhus V, Denmark
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Department of Commerce, Finance and Shipping, Cyprus University of Technology, P.O. Box 50329, Limassol 3603, Cyprus
*
Author to whom correspondence should be addressed.
Academic Editor: Robert Brooks
J. Risk Financial Manag. 2021, 14(6), 249; https://doi.org/10.3390/jrfm14060249
Received: 12 May 2021 / Revised: 26 May 2021 / Accepted: 29 May 2021 / Published: 3 June 2021
(This article belongs to the Special Issue Co-movement of International Financial Markets)
We investigate the risk–return trade-off on the US and European stock markets. We investigate the non-linear risk–return trade-off with a special eye to the tails of the stock returns using quantile regressions. We first consider the US stock market portfolio. We find that the risk–return trade-off is significantly positive at the upper tail (0.9 quantile), where the upper tail is large positive excess returns. The positive trade-off is as expected from asset pricing models. For the lower tail (0.1 quantile), that is for large negative stock returns, the trade-off is significantly negative. Additionally, for the median (0.5 quantile), the risk–return trade-off is insignificant. These results are recovered for the US industry portfolios and for Eurozone stock market portfolios. View Full-Text
Keywords: risk–return trade-off; quantile regressions; VIX; stock markets risk–return trade-off; quantile regressions; VIX; stock markets
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MDPI and ACS Style

Aslanidis, N.; Christiansen, C.; Savva, C.S. Quantile Risk–Return Trade-Off. J. Risk Financial Manag. 2021, 14, 249. https://doi.org/10.3390/jrfm14060249

AMA Style

Aslanidis N, Christiansen C, Savva CS. Quantile Risk–Return Trade-Off. Journal of Risk and Financial Management. 2021; 14(6):249. https://doi.org/10.3390/jrfm14060249

Chicago/Turabian Style

Aslanidis, Nektarios, Charlotte Christiansen, and Christos S. Savva 2021. "Quantile Risk–Return Trade-Off" Journal of Risk and Financial Management 14, no. 6: 249. https://doi.org/10.3390/jrfm14060249

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