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International Asset Pricing And Time Varying Risk Premia
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Book Synopsis International Asset Pricing and Time-Varying Risk Premia by : Devraj Basu
Download or read book International Asset Pricing and Time-Varying Risk Premia written by Devraj Basu and published by . This book was released on 2019 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper introduces an international asset pricing model with time-varying risk premia. It augments the two factor model which has the return on the world index and trade weighted exchange rates as factors, with skewness and kurtosis factors. This leads to a stochastic discount factor that is non-linear and has time-varying factor loadings that are functions of global variables. We test this model on market indices, size and momentum sorted portfolios that are formed from stocks listed in G8 countries, as well as country-neutral size, book-to-market and momentum portfolios. Overall, the model is capable of pricing almost all sets of base assets unconditionally using only global predictive variables. It also explains much of the cross sectional variation of the country, size and momentum portfolios, and also achieves much of the substantial size and momentum premiums. The role of time-varying risk premiums that are functions of global variables is crucial to the performance of the model, particularly in the case of the exchange rate factor.
Book Synopsis Time-Varying Risk Premia in Foreign Exchange and Equity Markets by : Chu-Sheng Tai
Download or read book Time-Varying Risk Premia in Foreign Exchange and Equity Markets written by Chu-Sheng Tai and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the puzzles in international finance literature is the deviations from Uncovered Interest Parity (UIP). In this paper, I further examine the validity of the risk premia hypothesis in explaining this puzzle by testing a conditional international CAPM (ICAPM) in the absence of Purchasing Power Parity (PPP) using data from both foreign exchange and equity markets in Asia-Pacific countries. When considering foreign exchange markets only, I find that conditional variances are not related to the deviations from UIP in any statistical sense based on an univariate GARCH(1,1)-M model. However, as I consider both foreign exchange and equity markets together and test the conditional ICAPM in the absence of PPP, I can not reject the model based on the J-test by Hansen (Econometrica 50 (1982), 1029-1054), and find significant time-varying market and foreign exchange risk premia presented in the data. This empirical evidence supports the notion of time-varying risk premia in explaining the deviations from UIP. It also supports the idea that the foreign exchange risk is not diversifiable and hence should be priced in both markets.Key Words: International asset pricing, Uncovered interest parity, Time-varying risk premium, GARCH, GMM.
Book Synopsis International Asset Pricing and Portfolio Diversification with Time-Varying Risk by : Giorgio De Santis
Download or read book International Asset Pricing and Portfolio Diversification with Time-Varying Risk written by Giorgio De Santis and published by . This book was released on 1995 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Global Risk Premia on International Investments by :
Download or read book Global Risk Premia on International Investments written by and published by Springer-Verlag. This book was released on 2013-07-01 with total page 324 pages. Available in PDF, EPUB and Kindle. Book excerpt: Implementing unconditional as well as conditional beta pricing models, the author identifies global economic factors that affect the performance of international investments.
Book Synopsis Financial Markets and the Real Economy by : John H. Cochrane
Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Book Synopsis Tests of an International Capital Asset Pricing Model with Stocks and Government Bonds and Regime Switching Prices of Risk and Intercepts by : Tom Arild Fearnley
Download or read book Tests of an International Capital Asset Pricing Model with Stocks and Government Bonds and Regime Switching Prices of Risk and Intercepts written by Tom Arild Fearnley and published by . This book was released on 2004 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper tests a conditional multivariate International Capital Asset Pricing Model for US, Japanese and European stocks and government bonds, covering the period 1993-2001. Time variation in the prices of market and currency risk is modelled by means of synchronous regime switching. The paper also explores the statistical significance and time variation of asset specific intercept terms, again using synchronous regime switching. The prices of risk are found to be highly time varying. The price of market risk is statistically significant, and the international CAPM risk premia are validated, although currency risk premia are not statistically significant. However, the intercept terms are typically large and significant, implying an overall rejection of the international CAPM, and suggesting that additional, unidentified pricing factors contribute to return expectations.
Book Synopsis Time Varying Risk Premia in Futures Markets by : Mr.Manmohan S. Kumar
Download or read book Time Varying Risk Premia in Futures Markets written by Mr.Manmohan S. Kumar and published by International Monetary Fund. This book was released on 1990-12-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper undertakes an econometric investigation into the presence of risk premium in commodity futures markets. The statistical tests are derived from a formal model of asset pricing and are applied to futures prices in a variety of commodity markets. The results suggest that for several commodities there is evidence of a time varying risk premium, particularly in futures contracts maturing six months ahead. The implications of the study for the efficiency of the futures markets and the costs of using these markets for hedging are also noted.
Book Synopsis International Asset Pricing and Portfolio Diversification with Time-Varying Risk by : Giorgio De Santis
Download or read book International Asset Pricing and Portfolio Diversification with Time-Varying Risk written by Giorgio De Santis and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We test the conditional CAPM for the world's eight largest equity markets using a parsimonious GARCH parameterization. Our methodology can be applied simultaneously to many assets and, at the same time, accommodate general dynamics of the conditional moments. The evidence supports most of the pricing restrictions of the model, but some of the variation in risk-adjusted excess returns remains predictable during periods of high interest rates. Our estimates indicate that, although severe market declines are contagious, the expected gains from international diversification for a U.S. investor average 2.11% per year and have not significantly declined over the last two decades.
Book Synopsis Time-Varying Asset Pricing Models in the Context of Segmented Markets by : Chris Bilson
Download or read book Time-Varying Asset Pricing Models in the Context of Segmented Markets written by Chris Bilson and published by . This book was released on 2002 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores and tests two multi-factor asset pricing models in an international context. One model focuses only on local risk factors and therefore assumes that the market is completely segmented. The other model focuses only on global risk factors and assumes that the market is fully integrated. The models incorporate time-variation in both the risk exposures and risk premia. The models are applied in cross-section to a range of developed and emerging markets so that varying levels of integration are examined. Expected returns are formed using time-varying estimates of risk premia that allow for out-of-sample testing. Using a range of performance metrics, the findings show that returns in developed markets are better approximated by a global pricing model, whereas returns in emerging markets are better represented by a local pricing model. These results are found to be generally robust to a range of research design issues.
Book Synopsis The World Price of Foreign Exchange Risk by : Bernard Dumas
Download or read book The World Price of Foreign Exchange Risk written by Bernard Dumas and published by . This book was released on 1993 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a world capital market in which the investor population is heterogenous. Investors of different countries differ in the prices of goods at which they consume the income from their investments. In such a setting, the international CAPM incorporates rewards for exchange rate risk, in addition to the traditional reward for market-covariance risk. The aim of the paper is to determine whether these additional risk premia empirically playa significant role in the pricing of securities. The test being conducted is a test of a conditional version of the CAPM. It builds on the recent empirical literature which points out that stock market returns may, to some extent, be predicted on the basis of a number of instrumental variables, such as interest rates and dividend yields. All previous tests of the international CAPM with exchange risk premia have been tests of the unconditional version and have been inconclusive.
Book Synopsis International Asset Pricing by : Charles M.C. Lee
Download or read book International Asset Pricing written by Charles M.C. Lee and published by . This book was released on 2004 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study presents a new methodology for estimating international cost of capital. Using a discounted cash flow model, we estimate market implied risk premia for firms in the G-7 countries during the 1990 to 2000 time period. We find that the average risk premia in G-7 countries typically fall within a narrow range of 2% to 4%, and that risk premia are consistently higher for some countries and industries. Variables most useful in explaining cross-sectional variation in implied risk premia are return volatility, size, B/M ratio, analyst growth forecast, and lagged industry-country risk premia. Together, these variables explain 20% to 30% of the cross-sectional variation in international risk premia. Interestingly, beta measures from various international asset pricing models have little explanatory power, while betas corresponding to empirical size and book-to-market factors do much better.
Book Synopsis Empirical Asset Pricing by : Wayne Ferson
Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
Book Synopsis An Evaluation of International Asset Pricing Models by : Magnus Dahlquist
Download or read book An Evaluation of International Asset Pricing Models written by Magnus Dahlquist and published by . This book was released on 2002 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Global Asset Allocation by : Heinz Zimmermann
Download or read book Global Asset Allocation written by Heinz Zimmermann and published by John Wiley & Sons. This book was released on 2003-02-03 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt: Reveals new methodologies for asset pricing within a global asset allocation framework. Contains cutting-edge empirical research on global markets and sectors of the global economy. Introduces the Black-Litterman model and how it can be used to improve global asset allocation decisions.
Book Synopsis Time-varying Distributions of Returns, Nominal Interest Rates and Risk Premia in a Dynamic Asset Pricing Model by : Alberto Giovannini
Download or read book Time-varying Distributions of Returns, Nominal Interest Rates and Risk Premia in a Dynamic Asset Pricing Model written by Alberto Giovannini and published by . This book was released on 1986 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Global Stock Markets by : Wolfgang Drobetz
Download or read book Global Stock Markets written by Wolfgang Drobetz and published by Springer Science & Business Media. This book was released on 2013-06-29 with total page 346 pages. Available in PDF, EPUB and Kindle. Book excerpt: Wolfgang Drobetz provides empirical evidence on the time variation of expected stock returns over the stages of the business cycle.
Book Synopsis Three Essays on International Asset Pricing by : Chu-Sheng Tai
Download or read book Three Essays on International Asset Pricing written by Chu-Sheng Tai and published by . This book was released on 1999 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Two dimensions that complicate finance in an international setting are market segmentation and foreign exchange risk. With the increasing globalization of financial markets, these two effects require that many issues such as investment analysis, risk management, asset pricing and capital budgeting confronting financial professionals have to rethink in an international context. My dissertation consists of three essays that intend to address the following questions: "Can time-varying risk premia explain the deviations from Uncovered Interest Parity (UIP)?", "Is foreign exchange risk priced in international financial markets?", and "Are emerging financial markets integrated with world markets?"
