The Role of U.S. Market on International Risk-Return Tradeoff Relations

37 Pages Posted: 28 Sep 2016 Last revised: 10 Feb 2017

See all articles by Licheng Sun

Licheng Sun

Old Dominion University

Liang Meng

Old Dominion University

Mohammad Najand

Old Dominion University - Finance

Date Written: February 2, 2017

Abstract

We study the intertemporal risk-return tradeoff relations based on returns from 18 international markets. We find striking new empirical evidence that the inclusion of U.S. market returns significantly changes the estimated risk-return tradeoff relations in international markets from mostly negative to predominantly positive. Our results are consistent with the lead-lag effect between U.S. and international markets in the sense of Rapach, Strauss, and Zhou (2013).

Keywords: Risk-Return Tradeoff, International Markets, Intertemporal CAPM, Lead-Lag Effect, Multivariate GARCH-in-Mean

JEL Classification: G11, G12, G15

Suggested Citation

Sun, Licheng and Meng, Liang and Najand, Mohammad, The Role of U.S. Market on International Risk-Return Tradeoff Relations (February 2, 2017). Available at SSRN: https://ssrn.com/abstract=2844143 or http://dx.doi.org/10.2139/ssrn.2844143

Licheng Sun (Contact Author)

Old Dominion University ( email )

Strome College of Business
Department of Finance
Norfolk, VA 23529-0222
United States

Liang Meng

Old Dominion University ( email )

Norfolk, VA 23529-0222
United States

Mohammad Najand

Old Dominion University - Finance ( email )

School of Business and Public Administration
Norfolk, VA 23529-0222
United States
757-683-3509 (Phone)
757-683-5639 (Fax)

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