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The risk-return tradeoff: A COGARCH analysis of Merton's hypothesis

Muller, Gernot; Durand, Robert; Maller, Ross

Description

We analysed daily returns of the CRSP value weighted and equally weighted indices over 1953-2007 in order to test for Merton's theorised relationship between risk and return. Like some previous studies we used a GARCH stochastic volatility approach, employing not only traditional discrete time GARCH models but also using a COGARCH - a newly developed continuous-time GARCH model which allows for a rigorous analysis of unequally spaced data. When a risk-return relationship symmetric to positive...[Show more]

CollectionsANU Research Publications
Date published: 2011
Type: Journal article
URI: http://hdl.handle.net/1885/65712
Source: Journal of Empirical Finance
DOI: 10.1016/j.jempfin.2010.11.003

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