International Asset Pricing, Currency Risk and Integration of Markets

Authors

  • Sema BAYRAKTAR Istanbul Bilgi University

Keywords:

Market integration, Market segmentation, Exchange rate risk, Asset pricing, GARCH

Abstract

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.

Published

30-11-2014

How to Cite

BAYRAKTAR, S. (2014). International Asset Pricing, Currency Risk and Integration of Markets. Eurasian Journal of Business and Economics, 7(14), 109-136. Retrieved from https://ejbe.org/index.php/EJBE/article/view/136

Issue

Section

Articles