This paper investigates whether equity indices of 24 emerging and 28 developed markets compensate their investors equally after taking risk into account, and examines the predictive power of reward-to-risk ratios for expected market returns. We place special emphasis on downside risk by...

Contrary to the theoretical principle that higher risk is compensated with higher expected return, the literature shows that low-risk stocks outperform high-risk stocks. Using a large-scale household dataset, we provide an explanation for this puzzling result that the anomalous negative...