  This study develops a multi-factor framework where not only market risk is
considered but also potential changes in the investment opportunity set.
Although previous studies find no clear evidence about a positive and
significant relation between return and risk, favourable evidence can be
obtained if a non-linear relation is pursued. The positive and significant
risk-return trade-off is essentially observed during low volatility periods.
However, this relationship is not obtained during periods of high volatility.
Also, different patterns for the risk premium dynamics in low and high
volatility periods are obtained both in prices of risk and market risk
dynamics.
