Most asset pricing models postulate a positive relationship between a stock portfolio's expected returns and risk, which is often modeled by the variance of the asset price. This paper uses GARCH in mean models to examine the relationship between mean returns on a stock portfolio and its conditional variance or standard deviation. After estimating a variety of models from daily and monthly portfolio return data, we conclude that any relationship between mean returns and own variance or standard deviation is weak. The results suggest that investors consider some other risk measure to be more important than the variance of portfolio returns.

Mortgage overage pricing is little understood by consumers and has received little academic scrutiny. We consider the impact of the market power of individual loan officers on overages paid by borrowers, particularly minorities. We include numerous borrower and lender characteristics unavailable previously. We find that minorities who purchase homes pay larger overages than whites, but our evidence suggests that this traces to differences in the pools of borrowers rather than to racial discrimination. We conclude that a more effective way to eliminate racial differences in overages is to increase minorities’ ability to bargain rather than to enact additional anti-discrimination laws.