This paper investigates whether the risk-return relation varies, depending on changing market volatility and up/down market conditions. Three market regimes based on the level of conditional volatility of market returns are specified — "low", "neutral" and "high". The market model is extended...

In this paper we investigate the relation between idiosyncratic risk and expected return by estimating idiosyncratic volatility in different factor models including the downside and upside market models. In the analysis with portfolios, our results suggest an inverse relation between...

The finite sample performance of the Wald, Generalized Method of Moment (GMM) and Likelihood Ratio (LR) tests of multivariate asset pricing tests have been investigated in several studies on the US financial markets. This article extends this analysis in two important ways. Firstly, considering...