A1 Vertaisarvioitu alkuperäisartikkeli tieteellisessä lehdessä
International asset pricing models and currency risk: Evidence from Finland 1970-2004
Tekijät: Antell J, Vaihekoski M
Kustantaja: ELSEVIER SCIENCE BV
Julkaisuvuosi: 2007
Journal: Journal of Banking and Finance
Tietokannassa oleva lehden nimi: JOURNAL OF BANKING & FINANCE
Lehden akronyymi: J BANK FINANC
Vuosikerta: 31
Numero: 9
Aloitussivu: 2571
Lopetussivu: 2590
Sivujen määrä: 20
ISSN: 0378-4266
DOI: https://doi.org/10.1016/j.jbankfin.2006.09.013
Tiivistelmä
In this paper we investigate whether global, local and currency risks are priced in the Finnish stock market using conditional international asset pricing models. We take the view of a US investor. The estimation is conducted using a modified version of the multivariate GARCH framework of [De Santis, G., Gerard, B., 1998. How big is the premium for currency risk? Journal of Financial Economics 49, 375-412]. For a sample period from 1970 to 2004, we find the world risk to be time-varying. While local risk is not priced for the USA, the local component is significant and time-varying for Finland. Currency risk is priced in the Finnish market, but is not time-varying using the De Santis and Gerard specification. This suggests that the linear specification for the currency risk may not be adequate for non-free floating currencies. (c) 2007 Elsevier B.V. All rights reserved.
In this paper we investigate whether global, local and currency risks are priced in the Finnish stock market using conditional international asset pricing models. We take the view of a US investor. The estimation is conducted using a modified version of the multivariate GARCH framework of [De Santis, G., Gerard, B., 1998. How big is the premium for currency risk? Journal of Financial Economics 49, 375-412]. For a sample period from 1970 to 2004, we find the world risk to be time-varying. While local risk is not priced for the USA, the local component is significant and time-varying for Finland. Currency risk is priced in the Finnish market, but is not time-varying using the De Santis and Gerard specification. This suggests that the linear specification for the currency risk may not be adequate for non-free floating currencies. (c) 2007 Elsevier B.V. All rights reserved.
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