Empirical Research on Market Risk and Return of Stock Portfolio
Xiao Zhong-y · 2014
This paper provided an empirical investigation of the predictive ability of average variance and average correlation of a stock portfolio which was consist of 300 big-cap stocks in the Chinese A-share market. The regression results showed that the changes in stock market risk might be interpreted as changes in average variance of individual stocks. The average variance that leveraged aggregate risk was significantly related to high stock market risk and predicted subsequently large market excess return. Such empirical result that provided evidence to against Roll's critique also added contribution to current literature by supporting the positive relationship between market risk and return.