On risk-return relationship: an application of GARCH (p,q)-M model to Asia _ Pacific region

Article


Yakob, Noor Azuddin and Delpachitra, Sarath. 2007. "On risk-return relationship: an application of GARCH (p,q)-M model to Asia _ Pacific region." International Journal of Science and Research. 2 (1), pp. 33-39.
Article Title

On risk-return relationship: an application of GARCH (p,q)-M model to Asia _ Pacific region

Article CategoryArticle
AuthorsYakob, Noor Azuddin (Author) and Delpachitra, Sarath (Author)
Journal TitleInternational Journal of Science and Research
Journal Citation2 (1), pp. 33-39
Number of Pages7
Year2007
Place of PublicationGlev Waverley, Vic. Australia
Web Address (URL)http://www.international.org.au/ijsr.htm
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.

KeywordsRisk return relationship, GARCH, Asia Pacifc stock markets
ANZSRC Field of Research 2020350208. Investment and risk management
380203. Economic models and forecasting
Public Notes

Copyright ISJR. Published version available in USQ ePrints with permission of publisher, for non-profit and academic purposes.

Byline AffiliationsDepartment of Finance and Banking
Department of Business
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