A1 Refereed original research article in a scientific journal
Time-varying global and local sources of market and currency risks in Russian stock market
Authors: Saleem K, Vaihekoski M
Publisher: ELSEVIER SCIENCE BV
Publication year: 2010
Journal: International Review of Economics and Finance
Journal name in source: INTERNATIONAL REVIEW OF ECONOMICS & FINANCE
Journal acronym: INT REV ECON FINANC
Volume: 19
Issue: 4
First page : 686
Last page: 697
Number of pages: 12
ISSN: 1059-0560
DOI: https://doi.org/10.1016/j.iref.2010.03.005
Abstract
In this paper we study international asset pricing models and the pricing of global and local market risks as well as currency risk in the Russian stock market from an international investors' point of view using weekly data from 1999 to 2009. In our empirical specification, we utilize the multivariate GARCH-M framework of De Santis and Gerard (1998). We find currency risk to be priced in the Russian market. The price of currency risk is found to be time-varying and affected for example by the price of oil. Moreover, our results suggest that the Russian market is partially segmented and the local market risk is priced in the market. Our model implies in-sample risk premium for the Russian equity market that is, on average, almost ten times higher than that of the US and that the Russian risk premium is on average caused mostly by the local and currency risk components. (C) 2010 Elsevier Inc. All rights reserved.
In this paper we study international asset pricing models and the pricing of global and local market risks as well as currency risk in the Russian stock market from an international investors' point of view using weekly data from 1999 to 2009. In our empirical specification, we utilize the multivariate GARCH-M framework of De Santis and Gerard (1998). We find currency risk to be priced in the Russian market. The price of currency risk is found to be time-varying and affected for example by the price of oil. Moreover, our results suggest that the Russian market is partially segmented and the local market risk is priced in the market. Our model implies in-sample risk premium for the Russian equity market that is, on average, almost ten times higher than that of the US and that the Russian risk premium is on average caused mostly by the local and currency risk components. (C) 2010 Elsevier Inc. All rights reserved.
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