RISK-RETURN TRADEOFF: EVIDENCE OF QUANTILE REGRESSION MODELS

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BOTSHEKAN MOHAMMAD HASHEM; FARHADI ROUHOLLAH

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Journal: JOURNAL OF SECURITIES EXCHANGE Year:2016 | Volume:9 | Issue:33 Page(s): 47-70

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Title

RISK-RETURN TRADEOFF: EVIDENCE OF QUANTILE REGRESSION MODELS

Author(s)

BOTSHEKAN MOHAMMAD HASHEM | FARHADI ROUHOLLAH | Issue Writer Certificate

Keywords

UNEXPECTED VARIANCEQ2

PROSPECT THEORYQ2

RISK-RETURN TRADEOFFQ2

EX POST FACTO STUDIESQ2

QUANTILE REGRESSION MODELQ2

Abstract

In this research RISK-RETURN TRADEOFF examined in scope of EX POST FACTO STUDIES, using OLS Model and QUANTILE REGRESSION MODEL. By using of daily returns of six indexes of Tehran Stock Exchange (TSE), linear relation between excess return and risk examined that evidence indicates significant (positive) tradeoff between excess return and risk. However, results of QUANTILE REGRESSION MODEL show that risk-return relation is different in returns distribution and vary from negative relation in the lower quantiles to positive relation in the upper quantiles. Linear regression model and QUANTILE REGRESSION MODEL show also that UNEXPECTED VARIANCE can explain excess return at least similar to expected variance. The results can also be interpreted with both insight of standard finance and insight of behavioral finance. In standard finance area, risk-return positive relation that exists in upper quintiles is consistent with long run growth of economy. Moreover, negative relation between return and risk in lower quintiles implies more uncertainty and as a result causing stock returns to fall. In behavioral finance area, regime-dependent behavior of slope coefficients is consistent with prediction of PROSPECT THEORY of investor’s behaviors around the reference point.

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APA: Copy

BOTSHEKAN, MOHAMMAD HASHEM, & FARHADI, ROUHOLLAH. (2016). RISK-RETURN TRADEOFF: EVIDENCE OF QUANTILE REGRESSION MODELS. JOURNAL OF SECURITIES EXCHANGE, 9(33 ), 47-70. SID. https://sid.ir/paper/187741/en

Vancouver: Copy

BOTSHEKAN MOHAMMAD HASHEM, FARHADI ROUHOLLAH. RISK-RETURN TRADEOFF: EVIDENCE OF QUANTILE REGRESSION MODELS. JOURNAL OF SECURITIES EXCHANGE[Internet]. 2016;9(33 ):47-70. Available from: https://sid.ir/paper/187741/en

IEEE: Copy

MOHAMMAD HASHEM BOTSHEKAN, and ROUHOLLAH FARHADI, “RISK-RETURN TRADEOFF: EVIDENCE OF QUANTILE REGRESSION MODELS,” JOURNAL OF SECURITIES EXCHANGE, vol. 9, no. 33 , pp. 47–70, 2016, [Online]. Available: https://sid.ir/paper/187741/en

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