Value at risk and return in Chinese and the US stock markets: Double long memory and fractional cointegration |
| |
| Institution: | 1. School of Business, Hunan Normal University, Changsha, 36 Lushan Road, Yuelu District, Changsha, Hunan, PR China;2. The School of Economics, Xiamen University, Xiamen, Economics Building, Xiamen University, Xiamen, Fujian, PR China;3. Guangdong University of Foreign Studies, Guangzhou, Xiaoguwei, Panyu District, Guangzhou, PR China;1. Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford CM1 1SQ, United Kingdom;2. Department of Economics, Northeastern Illinois University, 5500 N St Louis Ave, BBH 344G, Chicago, IL 60625, USA;3. Department of Economics, University of Pretoria, Pretoria 0002, South Africa;4. Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China;5. School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China;1. HEC Montréal and Deloitte LLP, Canada;2. UQAM School of Management, Canada;3. HEC Montréal, Canada;4. Canada Research Chair in Risk Management, HEC Montréal, Canada |
| |
| Abstract: | Given that the United States is an engine of global stock market while China is the largest emerging market with a cornucopia of anomalies in particular, it is vital to investigate the risk-return relationship in the two markets. This paper brings new insights not only into risk-return tradeoff, but also to the leverage effect, with the application of the fractionally co-integrated vector auto-regression (FCVAR) model capturing the fractional cointegrated relationship and long memory property. Results show that China stock markets own the property of double long memory but the US markets don’t. Most of all, in the US market, a positive risk-return tradeoff exists for the whole sample while after the crisis, even we find the negative relation, it’s not a volatility feedback effect but low risk and high returns. However, there is only a volatility feedback effect in China stock markets. Besides, there is a leverage effect in the US market, while Chinese market exhibits a reverse one, another anomaly, indicating significant difference in the two markets again. |
| |
| Keywords: | Risk-return relation Fractional cointegration Double long memory Stock markets |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
