Risk-return relationship from the Asia Pacific perspective

Paper


Yakob, Noor Azuddin, Beal, Diana and Delpachitra, Sarath. 2005. "Risk-return relationship from the Asia Pacific perspective." Daly, Kevin (ed.) 3rd Financial Markets Asia-Pacific Conference. Sydney, Australia 26 - 27 May 2005 Sydney, Australia.
Paper/Presentation Title

Risk-return relationship from the Asia Pacific perspective

Presentation TypePaper
AuthorsYakob, Noor Azuddin (Author), Beal, Diana (Author) and Delpachitra, Sarath (Author)
EditorsDaly, Kevin
Journal or Proceedings TitleProceedings of the 3rd Financial Markets Asia-Pacific Conference
Number of Pages12
Year2005
Place of PublicationSydney, Australia
ISBN9780646448435
Conference/Event3rd Financial Markets Asia-Pacific Conference
Event Details
3rd Financial Markets Asia-Pacific Conference
Event Date
26 to end of 27 May 2005
Event Location
Sydney, Australia
Abstract

Despite the criticisms on the validity of the CAPM, finance researchers continue to adopt the model in trying to describe the relationship between risk and return. The
introduction of the GARCH(p,q)-M model provides an avenue for testing the model within the time-varying variance framework. This study employs the same model to address the issue within ten selected Asia Pacific countries. The result, though not comprehensive, shows that the CAPM still holds in explaining the risk-return relationship in China and Malaysia. The significant positive risk parameter coefficient suggests a positive linear relationship which indicates that investors are compensated for assuming high risk. Judging by the significant finding in China and Malaysia, this study provides evidence that the conditional CAPM is a useful tool for decision making in investments and corporate finance.

Keywordscapital asset pricing model; CAPM; risk return relationship; GARCH(p,q)-M model; China; Malaysia
ANZSRC Field of Research 2020350208. Investment and risk management
350203. Financial econometrics
380203. Economic models and forecasting
Byline AffiliationsCentre for Australian Financial Institutions
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