Economics, Econometrics and Finance
8 years ago

Increased risk on Bucharest Stock Exchange does not guarantee higher returns.

An Empirical Study on Risk-Return Tradeoff Using GARCH-Class Models: Evidence from Bucharest Stock Exchange
Cristiana Tudor

Paper Summary

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The article investigates volatility in the Bucharest Stock Exchange using different GARCH models. The study covers daily returns of the BSE composite index from January 2004 to July 2008. The results show that the E-GARCH model fits the data best. The GARCH-in-Mean model reveals that higher risk doesn't always mean higher future returns. All coefficients in the GARCH models are statistically significant, and their sum is close to one, indicating persistent variance. The long-term component of variance changes slowly over time.