Suchergebnisse

Using monthly, semi‐annual and annual sampling frequencies from February 1974 to June 1996, we reject the mean–variance efficiency of the Australian stock market while supporting the view that conditional variances are not constant in time. Results indicate that unexpected movements in key aggregate factors have added value in explaining industrial sector conditional volatility, particularly at horizons of six months and greater.

AbstractWe suggest that the distortion of the positive risk–return relation in the ICAPM is a consequence of trading by informed investors to exploit mispricing. We hypothesize and demonstrate that a non‐positive (strongly positive) risk–return relation following positive (negative) market returns is attributed to short‐selling (purchasing) of overpriced (underpriced) stocks along with optimistic (pessimistic) expectations conditional on good (bad) market news. We verify this asymmetry in the risk–return relation through the indirect risk–return relation conditional on good (bad) market news. We also find that the attenuation (reinforcement) of the positive risk–return relation is more profound in high‐ (low‐) sentiment periods.