Investigating risk-return relationship: An empirical study in Iraq stock market

Abstract

The objective of the current research is to detect the correlation between risk and return as there are inconclusive results regarding this issue. The study used the daily closing prices of six banks from Iraq Stock Exchange (ISE) over the period 1st Jan 2015 to 31 Dec 2017. The paper employed both symmetric and asymmetric models of different properties of "the Generalized Autoregressive Conditional Heteroscedastic (GARCH)". Findings obtained by the study could not give proof of the presence of a positive risk premium in the marketplace. Furthermore, the asymmetric model of the Exponential Generalized Autoregressive Conditional Heteroscedastic (EGARCH) showed asymmetry in stock returns which refers to the occurrence of power impact in the takings sequences. However, the results indicated that the good news is more destabilizing than bad news in ISE.