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Quantile Risk–Return Trade-Off

Department d’Economia, CREIP, Universitat Rovira i Virgili, Avinguda Universitat 1, 43204 Reus, Catalonia, Spain
CREATES, Department of Economics and Business Economics, Aarhus University, Fuglesangs Alle 4, 8210 Aarhus V, Denmark
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;
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.

AMA Style

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

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.

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