Summary of other empirical works
| Author(s) | Empirical work done and key objectives | Specific findings | Review/Remarks |
|---|---|---|---|
| Liu, Su, Wang, and Yu (2021) | The authors found a time dependent nature of relationship between market expected return and variance | There is a behavioral component in this relationship when under or over-reaction in price level occurs as a result of shock to some of the risk factors. This questions the idea of unique or objective positive trade-off as generally assumed in mainstream literature | |
| Lee et al. (2022) | The key objective of this study is to investigate effect of investor attention on variation of trade-off relations in a market | The study found that the anomaly of negative trade-off reduces as degree of attention declines irrespective of the risk proxy adopted | The authors admitted that negative trade-off found in some recent studies is an anomaly. But this would appear to negate the effectiveness of active strategy as portfolio management approach |
| Cotter and Salvador (2022) | Using US data for period 1963 to 2017, the authors sought to explain nature of non-linearities found in the price process and the determinants | The authors found that positive trade-off is associated with periods of low volatility, but mostly inverted during periods of great uncertainty in the economy | Does this then follow that research into high- risk economies should be expected to result in anomalous negative relations? |
| Shivaprasad et al. (2022) | The authors looked at risk and premiums of different options strategies on performance (measured by returns) | The research found that more riskier strategies like short straddle and short strangle negatively influenced pay-off while the less-riskier ones like long straddle and long strangle have positive pay-off | If this result holds up to real market behavior, it will obviously help investors in making desired portfolio choices that fit their risk-return preferences |
| Zhao and Wen (2022) | This research work studied effect of global green gas and environmental sustainability issues on financial markets, with specific focus on how associated policies have induced variation in risks and return | The authors found time-varying risk compensation coefficients. More importantly a statistically significant negative coefficient was found at 1% level of significance | A remarkable thing about this study is that it employed the Garch-M estimation method for analysis. It thus was able to account for structural breaks of positive and negative dimensions arising from policy choices made in the carbon markets |
| Capiello, Engle, and Sheppard (2006) | The authors went beyond equity to include bonds in search for nature of risk-return relations in the international assets market | The study found bond volatility that is expectedly lower than equity, but with no clear linkage to return | Remarkably, the authors employed price correlation dynamics, but the outcome implies that no definite trade-off pattern could be established |
| Author(s) | Empirical work done and key objectives | Specific findings | Review/Remarks |
|---|---|---|---|
| The authors found a time dependent nature of relationship between market expected return and variance | There is a behavioral component in this relationship when under or over-reaction in price level occurs as a result of shock to some of the risk factors. This questions the idea of unique or objective positive trade-off as generally assumed in mainstream literature | ||
| The key objective of this study is to investigate effect of investor attention on variation of trade-off relations in a market | The study found that the anomaly of negative trade-off reduces as degree of attention declines irrespective of the risk proxy adopted | The authors admitted that negative trade-off found in some recent studies is an anomaly. But this would appear to negate the effectiveness of active strategy as portfolio management approach | |
| Using US data for period 1963 to 2017, the authors sought to explain nature of non-linearities found in the price process and the determinants | The authors found that positive trade-off is associated with periods of low volatility, but mostly inverted during periods of great uncertainty in the economy | Does this then follow that research into high- risk economies should be expected to result in anomalous negative relations? | |
| The authors looked at risk and premiums of different options strategies on performance (measured by returns) | The research found that more riskier strategies like short straddle and short strangle negatively influenced pay-off while the less-riskier ones like long straddle and long strangle have positive pay-off | If this result holds up to real market behavior, it will obviously help investors in making desired portfolio choices that fit their risk-return preferences | |
| This research work studied effect of global green gas and environmental sustainability issues on financial markets, with specific focus on how associated policies have induced variation in risks and return | The authors found time-varying risk compensation coefficients. More importantly a statistically significant negative coefficient was found at 1% level of significance | A remarkable thing about this study is that it employed the Garch-M estimation method for analysis. It thus was able to account for structural breaks of positive and negative dimensions arising from policy choices made in the carbon markets | |
| The authors went beyond equity to include bonds in search for nature of risk-return relations in the international assets market | The study found bond volatility that is expectedly lower than equity, but with no clear linkage to return | Remarkably, the authors employed price correlation dynamics, but the outcome implies that no definite trade-off pattern could be established |
Source(s): Table by the author
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