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2007, No. 19
Posted 2007-08-02

Higher Risk Does Bring Higher Returns in Stock Markets Worldwide

by Hui Guo

The authors examine estimates of the risk-return trade off—the increase in the expected equity premium due to a one-unit increase in expected stock market volatility—for major international stock markets. Their results show that the risk-return trade-off is positive and economically important in U.S. data, the world stock market index, and stock returns for all other G7 countries.