Risk–return relationship and individualism

Sung Won Seo; Jiseob Kim; Jun Sik Kim

doi:10.1080/13504851.2021.1885604

Risk–return relationship and individualism

Sung Won Seo, Jiseob Kim, Jun Sik Kim

Department of Economics

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

This paper investigates the impact of individualism on risk–return relationship across countries. In theory, return is expected to have a positive relation with risk. However, we find an insignificant relation between the stock market’s return and the market’s conditional variance. Our empirical evidence also suggests that higher individualism weakens the relationship between return and variance. These findings are consistent with the investors in highly individualistic countries who are overoptimism or overconfident with risk mis-estimations.

Original language	English
Pages (from-to)	760-766
Number of pages	7
Journal	Applied Economics Letters
Volume	29
Issue number	8
DOIs	https://doi.org/10.1080/13504851.2021.1885604
Publication status	Published - 2022

Bibliographical note

Funding Information:
This work was supported by the Incheon National University [Incheon National University Research Grant in 2017].

Publisher Copyright:
© 2021 Informa UK Limited, trading as Taylor & Francis Group.

All Science Journal Classification (ASJC) codes

Economics and Econometrics

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10.1080/13504851.2021.1885604

Cite this

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title = "Risk–return relationship and individualism",

abstract = "This paper investigates the impact of individualism on risk–return relationship across countries. In theory, return is expected to have a positive relation with risk. However, we find an insignificant relation between the stock market{\textquoteright}s return and the market{\textquoteright}s conditional variance. Our empirical evidence also suggests that higher individualism weakens the relationship between return and variance. These findings are consistent with the investors in highly individualistic countries who are overoptimism or overconfident with risk mis-estimations.",

author = "Seo, {Sung Won} and Jiseob Kim and Kim, {Jun Sik}",

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N2 - This paper investigates the impact of individualism on risk–return relationship across countries. In theory, return is expected to have a positive relation with risk. However, we find an insignificant relation between the stock market’s return and the market’s conditional variance. Our empirical evidence also suggests that higher individualism weakens the relationship between return and variance. These findings are consistent with the investors in highly individualistic countries who are overoptimism or overconfident with risk mis-estimations.

AB - This paper investigates the impact of individualism on risk–return relationship across countries. In theory, return is expected to have a positive relation with risk. However, we find an insignificant relation between the stock market’s return and the market’s conditional variance. Our empirical evidence also suggests that higher individualism weakens the relationship between return and variance. These findings are consistent with the investors in highly individualistic countries who are overoptimism or overconfident with risk mis-estimations.

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Risk–return relationship and individualism

Abstract

Bibliographical note

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