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Estimating The Risk-Return Relationship In The International Stock Market, Estimaciã“N De La Relaciã“N Rentabilidadriesgo En El Mercado Accionario Internacional

Author

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  • Daniel Botero Guzmán
  • Carlos Enrique Vecino Arenas

Abstract

The estimation of the risk-return international relationship requires strong assumptions. One of them is perfect integration. This article attempts to validate if this assumption holds for emerging and developed countries. We propose an alternative model that fits significantly to the risk-return relationship of the countries. Multivariable linear regression is used and validated by a robust regression. The results show that the CAPM is the best model to explain the risk return relationship in developed countries. Emerging markets remain segmented and are affected by specific risks which may explain over 40% of their returns

Suggested Citation

  • Daniel Botero Guzmán & Carlos Enrique Vecino Arenas, 2016. "Estimating The Risk-Return Relationship In The International Stock Market, Estimaciã“N De La Relaciã“N Rentabilidadriesgo En El Mercado Accionario Internacional," Revista Internacional Administracion & Finanzas, The Institute for Business and Finance Research, vol. 9(5), pages 1-13.
    • Handle: RePEc:ibf:riafin:v:9:y:2016:i:5:p:1-13
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    More about this item

    Keywords

    Return; Risk; Model; Estimate; Partial Integration;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F30 - International Economics - - International Finance - - - General

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