Buradasınız

International Asset Pricing, Currency Risk and Integration of Markets

Journal Name:

Publication Year:

DOI: 
10.17015/ejbe.2014.014.07
Author NameUniversity of Author
Abstract (2. Language): 
This study attempts to test the conditional version of the international asset-pricing model proposed in Bayraktar (2000, 2009) by using a parsimonious multivariate GARCH process. The theoretical model, contrary to previous empirical studies that have used random selection of currency risks, determines which currencies should be included in an empirical test, thus avoids this kind of random selection bias. The results from both full and sub-samples regressions provide some weak evidence for the existence of exchange rate risks, thus partially support the theory. However, exchange rate risks' premia are found considerably smaller than that of market risk.
109
136

JEL Codes:

REFERENCES

References: 

Adler, M., & Dumas, B. (June 1983). International Portfolio Choice and Corporation Finance:
A Synthesis. Journal of Finance 38, 3, 925-984. http://dx.doi.org/10.1111/j.1540-
6261.1983.tb02511.x
Ashley, A., & R.&M.Patterson D. (2010). “A Test of the GARCH(1, 1) Specification for the Daily
Stock Returns”,. Macroeconomic Dynamics, Volume14-SupplementS1, 137-144.
http://dx.doi.org/10.1017/S1365100510000015
Bayraktar, S. (2000). International asset Pricing and Exchange rate Eisk: Theoretical
Exposition, numerical analysis, and empirical investigation under integrated and frictional
capital markets. Philadelphia: Drexel University.
Bayraktar, S. (2009). The impact of exchange rate risk on international assetpricing under
various market structures. Review of Quantitative Finance and Accounting, 32(2), 169-195.
http://dx.doi.org/10.1007/s11156-008-0089-4
Bekaert, G., & Harvey,C. (1995). Time-varying world market integration. Journal of Finance,
50, 403-444. http://dx.doi.org/10.1111/j.1540-6261.1995.tb04790.x
International Asset Pricing, Currency Risk and Integration of Markets
EJBE 2014, 7 (14) Page | 135
Bollerslev, T. (1990). Modelling the coherence in short-run nominal exchange rates: A
multivariate generalized ARCH model. Review of Economics and Statistics, 72, 498-505.
http://dx.doi.org/10.2307/2109358
Bollerslev, T., & M.Wooldridge,J. (1992). Quasi-maximum likelihood estimation and
inference in dynamic models with time-varying covariances. Econometric reviews, 11, 143-
172. http://dx.doi.org/10.1080/07474939208800229
Bollerslev, T., Engle, R.F., & Wooldridge, J.M. (1988). A Capital Asset Pricing Model with
Time-Varying Covariances. Journal of Political Economy, 96, 116 -131.
http://dx.doi.org/10.1086/261527
Brown, R. L., Durbin, J., & Evans, J.M. (1975). Techniques for testing the constancy of
regression relationship over time. Journal of Royal Statistical Society, Series B, 149-163.
Cappiello, L., Castrén , O., & Jääskelä, J. (2003). Measuring the Euro Exchange Rate Risk
Premium: the Conditional International CAPM Approach. EFMA 2003, Helsinki, Finland, 1-30.
Chan, K., Karolyi, G.A., & Stulz, R.M. (1992). Global Financial Markets and the risk premium in
U:S. equity”,. Journal of Financial Economics, 32, 137-167.
http://dx.doi.org/10.1016/0304-405X(92)90016-Q
Chang, J.-r., Errunza, V., Hogan, K., & Hung, M.-w. (2005). An Intertemporal International
Asset Pricing Model: Theory and Empirical Evidence. European Financial Management, 11(2),
173–194.
http://dx.doi.org/10.1111/j.1354-7798.2005.00281.x
Chelley-Steeley, P., Pentecost, E.J., & Steeley, J. (1998). Exchange controls and European
stock market integration. Applied Economics, 30, 263-267.
http://dx.doi.org/10.1080/000368498326056
Davidson, R., & MacKinnon, J. (1981). Several tests for model specification in the presence of
alternative hypotheses”,. Econometrica, 49, 781-793.
http://dx.doi.org/10.2307/1911522
Eugene, F. F., & Andre,F. . (September 1979). Money, Bonds , and Foreign Exchange,.
American Economic Review, 69(4), 639-649.
Garuer Frederick,L.A., Litzenberger Robert H. , & Stehle Richard E. . (1976). Sharing Rules and
Equilibrium in an International Capital Market Under Uncertainty,. Journal of Financial
Economics, 3, 233-256.
http://dx.doi.org/10.1016/0304-405X(76)90005-2
Hamao, Y., Masulis, R.W. , & Ng., V. (1990). Correlations in Price Changes and Volatility
across International Stock Markets,. The Review of Financial Studies, 3(2), 281-307.
http://dx.doi.org/10.1093/rfs/3.2.281
Hansen, P., & Lunde A. (2005). A forecast comparison of volatility models: does anything
beat a GARCH(1,1)?”,. Journal of Applied Econometrics, 20(7), 873–889.
http://dx.doi.org/10.1002/jae.800
Harvey, A. (1990). The Econometric Analysis of Time Series (2nd ed.). Cambridge, Mass.: MIT
Press.
Harvey, C. (1991). The world price of covariance risk. Journal of Finance, 46, 111-157.
http://dx.doi.org/10.1111/j.1540-6261.1991.tb03747.x
Heckerman Donald, G. (1972). On the effects of exchange risk. Journal of International
Economics, 3, 379-387.
Sema BAYRAKTAR
Page |136 EJBE 2014, 7 (14)
http://dx.doi.org/10.1016/0022-1996(73)90029-9
Hsing, Y. (2011). Macroeconomic Determinants of the Stock Market Index and Policy
Implications: The Case of a Central European Country. Eurasian Journal of Business and
Economics, 4 (7), 1-11.
Johnston, J. (1984). Econometric Methods. New York: McGraw-Hill.
Korajczyk, R., & Viallet, C. (1989). An empirical investigation of international asset pricing.
Review of Financial Studies, 2, 553-585.
http://dx.doi.org/10.1093/rfs/2.4.553
Naik, P. K., & Padhi, P. (2012). The Impact of Macroeconomic Fundamentals on Stock Prices
Revisited: Evidence from Indian Data. Eurasian Journal of Business and Economics, 5(10), 25-
44.
Newey, W.K., & Kenneth,D.W. (1987). A simple, positive semi-definite, heteroskedasticity
and autocorrelation consistent covariance matrix. Econometrica, 55, 703-708.
http://dx.doi.org/10.2307/1913610
Pagan, A. (Feb.1984). Econometric Issues in the Analysis of Regressions with Generated
Regressors. International Economic Review, 25(1), 221-247.
http://dx.doi.org/10.2307/2648877
Quandt, R. (1958). The estimation of the parameters of a linear regression system obeying
two separate regimes. Journal of American Statistical Association, 53, 873-880.
http://dx.doi.org/10.1080/01621459.1958.10501484
Quandt, R. (1960). Tests of the hypothesis that a linear regression system obeys two
separate regimes. Journal of American Statistical Association, 55, 324-330.
http://dx.doi.org/10.1080/01621459.1960.10482067
Santis, G. D., & Gerard, B. (1998). How big is the premium for currency risk? Journal of
Financial Economics, 49, 375-412.
Solnik Bruno, H. (1974a). The International pricing of risk: An empirical investigation of the
world capital market structure. Journal of Finance, 29, 365-378.
http://dx.doi.org/10.1111/j.1540-6261.1974.tb03051.x
Solnik Bruno, H., & Dumas, B. (June 1995). The world price of foreign exchange risk. Journal
of Finance, 50(2), 445-479.
http://dx.doi.org/10.1111/j.1540-6261.1995.tb04791.x
Solnik, H. B. (1973). European Capital Markets: Towards a General Theory of International
Investment. Lexington, MA: Lexington Books.
Stehle, R. (1977). An empirical test of the alternative hypotheses of national and
international pricing of risky assets. Journal of Finance, 32(2), 493-502.
http://dx.doi.org/10.1111/j.1540-6261.1977.tb03287.x

Thank you for copying data from http://www.arastirmax.com