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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

Front. Econ. China    2008, Vol. 3 Issue (1) : 1-14
Is there a risk-return trade-off? Evidences from Chinese stock markets
KONG Dongmin 1, LIU Hening 2, WANG Le 3
1. Department of Finance, Huazhong University of Science and Technology, Wuhan 430074, China; 2.Department of Economics, Northern Illinois University, Dekalb, IL 60115, US; 3. Population Center, University of Minnesota, Minneapolis, MN 55455, US;
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Abstract Employing a recently developed method-mixed data sampling (MIDAS) approach - to assess the risk-return trade-off for Chinese stock markets, our results are striking. First, we fail to find any evidence of the risk-return trade-off in the first subsample (Jan 1993–Jan 2001), while we do find the existence of such relationship in the second subsample (Feb 2001–Dec 2005); such results suggest that as the markets become more mature, risks are compensated more properly. Second, we also compare the MIDAS results with the results obtained from conventional approaches such as the GARCH-type model. Our results are reasonably robust to the methods that we use, and the MIDAS and GARCH-type approaches outperform rolling-window approach in terms of modeling volatility.
Issue Date: 05 March 2008
 Cite this article:   
LIU Hening,KONG Dongmin,WANG Le. Is there a risk-return trade-off? Evidences from Chinese stock markets[J]. Front. Econ. China, 2008, 3(1): 1-14.
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