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Multi‐factor Risk‐return Relationships
Author(s) -
Diacogiannis George P.,
Diamandis Panayiotis F.
Publication year - 1997
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00121
Subject(s) - efficient frontier , risk–return spectrum , portfolio , economics , econometrics , expected return , rate of return on a portfolio , standard deviation , macro , factor analysis , frontier , financial economics , modern portfolio theory , investment performance , actuarial science , computer science , mathematics , return on investment , statistics , microeconomics , archaeology , production (economics) , programming language , history
This paper derives three multi‐factor risk‐return relationships each of which employs macro‐economic variables in presenting the underlying factors that influence security returns. The first relationship holds if the underlying portfolio lies on the expected return‐standard deviation efficient frontier, the second is valid when the underlying portfolio lies inside the efficient frontier and the third characterises security markets in which no arbitrage opportunities are present. An attempt is also made to appraise critically previous multi‐factor risk‐return relationships which rely on an expected return‐standard deviation approach.