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Downside risk in emerging markets

Atılgan, Yiğit and Demirtaş, K. Özgür (2012) Downside risk in emerging markets. (Accepted/In Press)

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Abstract

This paper investigates the relation between downside risk and expected returns on the aggregate stock market in an international context. Nonparametric and parametric Value at Risk (VaR) are used as measures of downside risk to determine the existence of a risk-return tradeoff. For emerging markets, fixed-effects panel data regressions provide evidence for a significantly positive relationship between monthly expected market returns and downside risk. This result is robust after controlling for aggregate dividend yield and price-to-fundamental ratios. The relationship between expected returns and downside risk is weaker for developed markets and vanishes when control variables are included in the specification.

Item Type:Article
Subjects:H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation
ID Code:19391
Deposited By:Yiğit Atılgan
Deposited On:16 Oct 2012 14:37
Last Modified:17 Jan 2014 15:33

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