While the risk return trade-off theory suggests a positive relationship between the expected return and the conditional volatility, the volatility feedback theory implies a channel that allows the conditional volatility to negatively affect the expected return. We examine the effects of the risk...

While the risk return trade-off theory suggests a positive relationship between the expected return and the conditional volatility, the volatility feedback theory implies a channel that allows the conditional volatility to negatively affect the expected return. We examine the effects of the risk...

This paper deals with three aspects of spectacular oil price episodes such as the one witnessed in 2008. First, the concept of temporary explosiveness is proposed as an empirical method for capturing this type of behavior. The application of a recently proposed recursive unit root test shows...