The volatility effect in emerging markets |
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| Affiliation: | 1. Hirao School of Management, Konan University, 8-33 Takamatsu, Nishinomiya, Hyogo 663-8204, Japan;2. Faculty of Economics, Osaka Gakuin University, 2-36-1 Kishibeminami, Suita Osaka 564-8511, Japan;3. Faculty of Economics, Shiga University, 1-1-1 Banba, Hikone, Shiga 522-8522, Japan;1. University of Auckland Business School, Auckland 1010, New Zealand;2. Department of Applied Finance, Macquarie University, NSW 2109, Australia;3. Institute of Financial Studies, Southwestern University of Finance and Economics, Chendu, China;4. Hull University Business School, University of Hull, Cottingham Rd, HU6 7RX Hull, United Kingdom;1. International Business Faculty, Beijing Normal University, Zhuhai, NO. 18 Jinfeng Road, Tangjiawan, Zhuhai City, Guangdong Province, China;2. Department of Finance, National Sun Yat-sen University, NO.70 Lien-hai Rd., Kaohsiung City, Taiwan |
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| Abstract: | We examine the empirical relation between risk and return in emerging equity markets and find that this relation is flat, or even negative. This is inconsistent with theoretical models such as the CAPM, which predict a positive relation, but consistent with the results of studies for developed equity markets. The volatility effect appears to be growing stronger over time, which we argue might be related to the increased delegated portfolio management in emerging markets. Finally, we find that the volatility effect in emerging markets is only weakly related to that in developed equity markets, which argues against a common-factor explanation. |
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