Arbeitspapier
Regime switches in the risk-return trade-off
This paper deals with the estimation of the risk-return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk-return relation through a Markov-switching specification. We find strong evidence for regime changes in the risk-return relation. This finding is robust to a large range of specifications. In the first regime characterized by low ex-post returns and high volatility, the risk-return relation is reversed, whereas the intuitive positive risk-return trade-off holds in the second regime. The first regime is interpreted as a flight-to-quality regime.
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Canada Working Paper ; No. 2013-51
- Classification
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Wirtschaft
General Financial Markets: General (includes Measurement and Data)
Asset Pricing; Trading Volume; Bond Interest Rates
- Subject
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Economic and statistical models
Financial markets
- Event
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Geistige Schöpfung
- (who)
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Ghysels, Eric
Guérin, Pierre
Marcellino, Massimiliano
- Event
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Veröffentlichung
- (who)
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Bank of Canada
- (where)
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Ottawa
- (when)
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2013
- DOI
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doi:10.34989/swp-2013-51
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ghysels, Eric
- Guérin, Pierre
- Marcellino, Massimiliano
- Bank of Canada
Time of origin
- 2013
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