The Time Variation Of Risk And Return In The Foreign Exchange And Stock Markets
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Author | : Alberto Giovannini |
Publisher | : |
Total Pages | : 56 |
Release | : 1988 |
Genre | : Business enterprises |
ISBN | : |
Recent empirical work indicates that, in a variety of financial markets, both conditional expectations and conditional variances of returns are time- varying. The purpose of this paper is to determine whether these joint fluctuations of conditional first and second moments are consistent with the Sharpe-Lintner-Mossin capital-asset-pricing model. We test the mean-variance model under several different assumptions about the time-variation of conditional second moments of returns, using weekly data from July 1974 to December 1986, that include returns on a portfolio composed of dollar, Deutsche mark, Sterling, and Swiss franc assets, together with the US stock market. The model is estimated constraining risk premia to depend on the time-varying conditional covariance matrix of the residuals of the expected returns equations. The results indicate that estimated conditional variances cannot explain the observed time-variation of risk premia. Furthermore, the constraints imposed by the static CAPH are always rejected.
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Release | : 1988 |
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Author | : Alberto GIOVANNINI |
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Total Pages | : |
Release | : 1988 |
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Author | : Alberto Giovannini |
Publisher | : |
Total Pages | : |
Release | : 1988 |
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ISBN | : |
Author | : Alberto Giovannini |
Publisher | : |
Total Pages | : 40 |
Release | : 1986 |
Genre | : Capital assets pricing model |
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Author | : Geert Bekaert |
Publisher | : |
Total Pages | : 30 |
Release | : 1994 |
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Author | : Geert Bekaert |
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Total Pages | : |
Release | : 1996 |
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This paper investigates the statistical properties of high frequency nominal exchange rates and forward premiums in the context of a dynamic two-country general equilibrium model. Primary focus is on the persistence, variability, leptokurtosis and conditional heteroskedasticity of exchange rates and on the behavior of foreign exchange risk premiums. The model combines temporal dependencies in preferences with a transaction cost technology that generates a role for money. Agents in the economy make decisions on a weekly frequency and face shocks which display time-varying uncertainty. Simulations reveal that the model accounts for the statistical properties of exchange rate data much more accurately than previous structural models
Author | : Wolfgang Drobetz |
Publisher | : Springer Science & Business Media |
Total Pages | : 346 |
Release | : 2013-06-29 |
Genre | : Business & Economics |
ISBN | : 3663085295 |
Wolfgang Drobetz provides empirical evidence on the time variation of expected stock returns over the stages of the business cycle.
Author | : John H. Cochrane |
Publisher | : Now Publishers Inc |
Total Pages | : 117 |
Release | : 2005 |
Genre | : Business & Economics |
ISBN | : 1933019158 |
Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Author | : Turan G. Bali |
Publisher | : |
Total Pages | : 37 |
Release | : 2012 |
Genre | : |
ISBN | : |
The literature has so far focused on the risk-return tradeoff in equity markets and ignored alternative risky assets. This paper examines the presence and significance of an intertemporal relation between expected return and risk in the foreign exchange market. The paper provides new evidence on the intertemporal capital asset pricing model by using high-frequency intraday data on currency and by presenting significant time-variation in the risk aversion parameter. Five-minute returns on the spot exchange rates of the U.S. dollar vis-a-vis six major currencies (the Euro, Japanese Yen, British Pound Sterling, Swiss Franc, Australian Dollar, and Canadian Dollar) are used to test the existence and significance of a daily risk-return tradeoff in the FX market based on the GARCH, realized, and range volatility estimators. The results indicate a positive, but statistically weak relation between risk and return on currency.