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The Role of U.S. Market on International Risk‐Return Tradeoff Relations
Author(s) -
Sun Licheng,
Meng Liang,
Najand Mohammad
Publication year - 2017
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12139
Subject(s) - economics , risk–return spectrum , financial economics , international market , rate of return , econometrics , monetary economics , international economics , finance , portfolio
We study the intertemporal risk‐return tradeoff relations based on returns from 18 international markets. We find striking new empirical evidence that the inclusion of U.S. market returns significantly changes the estimated risk‐return tradeoff relations in international markets from mostly negative to predominantly positive. Our results are consistent with the lead‐lag effect between U.S. and international markets in the sense of Rapach, Strauss and Zhou.