Intertemporal risk-return relationship in the Asian markets around the Asian crisis
Year: 2001
Type: article
Abstract: This study investigates the risk±return relationship in nine Asian capital markets and the U.S. before, during, and after the Asian ®nancial crisis. Using a state-dependent approach in a TGARCH(1,1)-M framework, we investigate a contemporaneous version of the CAPM by accounting for negative and positive market price of variance risk. We find a significant positive relationship between risk premium and variance in all markets in upstate, as well as a signi®cant negative relationship in downstate. Also, we validate our findings by showing that implied state-dependent market prices of variance risk explain risk premia across markets. Finally, we investigate how the model can be used to uncover overreaction and improve the number of correct directional calls in a tactical asset allocation strategy. Our results provide support for a contrarian strategy that individual investors can follow. Copyright 2001 Elsevier Science Inc. All rights reserved.
Source: Financial Services Review
Authors: Eric Girard, Hamid Rahman, Tarek Zaher
Institutions: Indiana State University, Alliant University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W1995147195