The relationship between risk and return is one of the most studied topics in finance. The majority of the literature is based on a linear, parametric relationship between expected returns and conditional volatility. However, there is no theoretical justification for the relationship to be...

This paper examines “leverage” and volatility feedback effects at the firm level by considering both market and firm level effects, using 242 individual firm stock data in the US market. We adopt a panel vector autoregressive framework which allows us to control simultaneously for common...

In the Schumpeterian creative disruption age, the authors firmly believe that an increasing application of electronic technologies in the finances opens a big number of new unlimited opportunities toward a new era of the ultra high frequency electronic trading in the foreign currencies exchange...

This study contributes to the investigation of the macro-finance interface by assessing the economic content and risk-based interpretation of widely employed risk factors in the specification of empirical asset pricing models, i.e., Fama–French size and value, Carhart momentum, as well as the...

The fact that stock market returns in Europe and the USA are characterised by conditional heteroscedasticity is by now well documented in a large literature. We address the question of whether the same is true of the four Chinese stock markets (Shanghai and Shenzhen A and B) over the period from...

After the crisis of 2008, and the important losses and shortfall in capital that it revealed, regulators conducted massive stress testing exercises in order to test the resilience of financial institutions in times of stress conditions. In this context, and considering the impact of these...

Several panel unit root tests based on different ways to account for cross-unit dependence are reviewed. The note then illustrates the tests by checking whether the martingale difference hypothesis is appropriate for stock prices on the German stock market: according to the martingale difference...

Expected returns and risk assessment are important issues when evaluating capital investment projects. We use VARX-MGARCH models and asset pricing theory to model the expected rate of return in Brazil, Colombia, Mexico and Peru for late 2006. The main objective of this paper is to present an...

In this paper, we propose several finite-sample specification tests for multivariate linear regressions (MLR) with applications to asset pricing models. We focus on departures from the assumption of i.i.d. errors assumption, at univariate and multivariate levels, with Gaussian and non-Gaussian...

In this paper, we propose exact inference procedures for asset pricing models that can be formulated in the framework of a multivariate linear regression (CAPM), allowing for stable error distributions. The normality assumption on the distribution of stock returns is usually rejected in...