On risk-return relationship: an application of GARCH (p,q)-M model to Asia _ Pacific region

Yakob, Noor Azuddin and Delpachitra, Sarath (2007) On risk-return relationship: an application of GARCH (p,q)-M model to Asia _ Pacific region. International Journal of Science and Research, 2 (1). pp. 33-39. ISSN 1832-1011

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Abstract

Despite the criticisms on the validity of the CAPM, finance researchers continue to adopt the model in trying to describe the relationship between risk and return. The introduction of the GARCH(p,q)-M model provides an avenue for testing the model within the time-varying variance framework. This study employs the same model to address the issue within ten selected Asia Pacific countries. The result, though not comprehensive, shows that the CAPM still holds in explaining the risk-return relationship in China and Malaysia. The significant positive risk parameter coefficient suggests a positive linear relationship which indicates that investors are compensated for assuming high risk. Judging by the significant finding in China and Malaysia, this study provides evidence that the conditional CAPM is a useful tool for decision making in investments and corporate finance.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Copyright ISJR. Published version available in USQ ePrints with permission of publisher, for non-profit and academic purposes.
Depositing User: Dr Sarath Delpachitra
Faculty / Department / School: Historic - Faculty of Business - Department of Finance and Banking
Date Deposited: 24 Oct 2007 07:53
Last Modified: 02 Jul 2013 22:52
Uncontrolled Keywords: Risk return relationship, GARCH, Asia Pacifc stock markets
Fields of Research (FOR2008): 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management
14 Economics > 1403 Econometrics > 140303 Economic Models and Forecasting
URI: http://eprints.usq.edu.au/id/eprint/3430

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