Reward-to-Risk Ratios in Turkish Financial Markets
Iktisat Isletme ve Finans, Vol. 28, No. 322, 2013
33 Pages Posted: 28 Mar 2012 Last revised: 28 Jul 2015
Date Written: March 27, 2012
Abstract
This paper investigates how reward-to-risk ratios compare among various government debt security (GDS) indices and sector indices in the Istanbul Stock Exchange. Risk is measured by either standard deviation or nonparametric and parametric value at risk. We find that the GDS indices have higher reward-to-risk ratios compared to the sector indices. GDS indices with longer maturities have lower reward-to-risk ratios and this reduction is especially pronounced when the ratios take downside risk into account. The reward-to-risk rankings for the sector indices are similar for each measure and the results are robust to currency conversion.
Keywords: bond markets, equity markets, downside risk, value at risk, risk-return tradeoff
JEL Classification: G10, G11, G12
Suggested Citation: Suggested Citation
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