Regime-dependent risk-return trade-off in ASEAN equity markets: Evidence from higher-order moments and threshold regression

Hubungan risiko-imbal hasil yang bergantung pada rezim di pasar saham ASEAN: Bukti dari momen orde tinggi dan regresi ambang batas

Abstract

This study aims to examine the risk-return trade-off across five major ASEAN equity markets Indonesia, Malaysia, the Philippines, Thailand, and Singapore using daily market data spanning from 2006 to 2025. Utilizing an advanced quantitative approach, the research employs market-specific GARCH models with skewed Student-t innovations to calculate lagged volatility, skewness, and kurtosis, which are subsequently evaluated using linear and threshold regressions conditioned on prior-period returns. The results reveal highly localized market dynamics rather than a uniform regional trend: significant and robust skewness premiums alongside regime-dependent volatility pricing are evident only in Indonesia, with Malaysia displaying a similar but weaker pattern. Conversely, findings for the Philippines remain inconclusive, while Thailand and Singapore exhibit neither characteristic. Notably, these distinct, market-specific behaviors remained stable throughout major global economic disruptions, including the Global Financial Crisis, the COVID-19 pandemic, and the 2022–2023 monetary tightening cycles. Theoretically and practically, these findings imply that regime-dependent, higher-moment risk pricing in ASEAN equities is fundamentally specific to individual countries, successfully extending the "good-volatility" framework previously established in developed bond markets to the complex landscape of emerging equity markets.