Department of Economics and Business Economics

Risk-Return Trade-Off for European Stock Markets

Research output: Working paperResearch


  • rp13_31

    Submitted manuscript, 820 KB, PDF document

  • Nektarios Aslanidis, University Rovira Virgili, Spain
  • Charlotte Christiansen
  • Christos S. Savva, Cyprus University of Technology, Cyprus
This paper adopts dynamic factor models with macro-finance predictors to revisit the intertemporal risk-return relation in five large European stock markets. We identify country specific, Euro area, and global factors to determine the conditional moments of returns considering the role of higher-order moments as additional measures of risk. The preferred combination of factors varies across countries. In the linear model, there is a strong but negative relation between conditional returns and conditional volatility. A Markov switching model describes the risk-return trade-off well. A number of variables have explanatory power for the states of the European stock markets.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages33
Publication statusPublished - 9 Oct 2013
SeriesCREATES Research Papers

See relations at Aarhus University Citationformats

Download statistics

No data available

ID: 56321905