Jump Risk Premia Across Major International Equity Markets PDF Download
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Author: Mohamed El Hedi Arouri
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
We decompose the non-diversifiable market risk into continuous and discontinuous components and jump systematic risks into positive vs. negative and small vs. large components. We examine their association with equity risk premia across major equity markets. We show that developed markets jumps are more closely linked to the aggregate market index than emerging and frontier ones. The reward for bearing both the continuous and downside jump risks is positive during the pre-crisis period whereas the reward for bearing the upside and large jump risks is negative during the crisis and post-crisis periods. We also provide evidence of significant continuous and discontinuous leverage effects during the pre-crisis period, suggesting that both continuous and discontinuous price and volatility risks share compensations for common underlying risk factors.
Author: Mohamed El Hedi Arouri
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
We decompose the non-diversifiable market risk into continuous and discontinuous components and jump systematic risks into positive vs. negative and small vs. large components. We examine their association with equity risk premia across major equity markets. We show that developed markets jumps are more closely linked to the aggregate market index than emerging and frontier ones. The reward for bearing both the continuous and downside jump risks is positive during the pre-crisis period whereas the reward for bearing the upside and large jump risks is negative during the crisis and post-crisis periods. We also provide evidence of significant continuous and discontinuous leverage effects during the pre-crisis period, suggesting that both continuous and discontinuous price and volatility risks share compensations for common underlying risk factors.
Author: William N. Goetzmann
Publisher: Oxford University Press
ISBN: 019803377X
Category : Business & Economics
Languages : en
Pages : 568
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Book Description
What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing. This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.
Author:
Publisher: Springer-Verlag
ISBN: 3663085287
Category : Business & Economics
Languages : de
Pages : 306
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Book Description
Implementing unconditional as well as conditional beta pricing models, the author identifies global economic factors that affect the performance of international investments.
Author: Stephen J. Brown
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
Recent evidence suggests that global equity markets are becoming more risky. We find that much of the apparent increase in international variance and covariance of returns can be attributed to systematic variations in global risk premia correlated across markets, rather than to any fundamental change in the risk attributes of these markets. This result has interest both for practitioners and for those interested in modeling global asset prices.
Author: Bradford Cornell
Publisher: John Wiley & Sons
ISBN: 9780471327356
Category : Business & Economics
Languages : en
Pages : 248
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Book Description
Das Thema Risikoprämie für Aktien (Equity Risk Premium) wird hier zum ersten Mal verständlich erklärt. Die Risikoprämie für Aktien stellt einen Renditeausgleich dar für das erhöhte Risiko, das ein Anleger bei der Investition in Aktien eingeht, im Vergleich zu einer Investition in risikofreie Staatsanleihen. Die Risikoprämie ist zwar von der Theorie her einfach, jedoch in der Praxis ein sehr komplexes Phänomen. Für Finanzentscheidungen ist es von größter Bedeutung, daß man das Prinzip der Risikoprämie versteht und es anwenden kann. Cornell erläutert das Thema Schritt für Schritt sehr anschaulich und ohne terminologischen Ballast. Zunächst wird die Risikoprämie im Zusammenhang mit der Geschichte des Aktienmarktes betrachtet. Der Haussemarkt der 90er dient dabei als Fallstudie. Cornell zeigt, welche Rückschlüsse man durch die Analyse der Risikoprämie im historischen Verlauf für den Aktienmarkt ziehen kann, z.B. ob Aktienkurse steigen oder fallen oder ob sich der Aktienmarkt verändert. Vorausschauende Schätzungen der Risikoprämie werden anhand verschiedener konkurrierender Modelle analysiert, wobei die Vorzüge der jeweiligen Methode mitbewertet werden. 'Equity Risk Premium' ist das erste Buch, das dieses wichtige Prinzip der Risiko-Nutzen-Analyse erschöpfend behandelt. Es vermittelt einen tiefen Einblick und deckt alle Grundlagen ab, damit Investoren fundierte Finanzentscheidungen treffen können. Ein absolutes Muß für institutionelle Anleger, Geldmanager und Finanzvorstände, die auf eine fundierte Marktanalyse zurückgreifen müssen. (06/99)
Author: Masazumi Hattori
Publisher:
ISBN:
Category :
Languages : en
Pages : 60
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Book Description
We estimate variance risk premiums (VRPs) in the stock markets of major advanced economies (AEs) and emerging market economies (EMEs) over 2007-15 and decompose the VRP into variance-diffusive risk premium (DRP) and variance-jump risk premium (JRP). Daily VAR analysis reveals significant spillovers from the VRPs of the United States and eurozone's AEs to the VRPs of other economic areas, especially during the post-Global Financial Crisis (GFC) period. We also find that during the post-GFC period, shocks to the DRPs of the United States and the eurozone's AEs have relatively strong and long-lived positive effects on the VRPs of other economic areas whereas shocks to their JRPs have relatively weak and short-lived positive effects. In addition, we show that increases in the size of US VRP, DRP and JRP tend to significantly reduce weekly equity fund flows to all other AEs and some EMEs during the post-GFC period. Finally, US DRP plays a more important role than US JRP in the determination of equity fund flows to all other AEs and some EMEs after the GFC, while the opposite holds true for equity fund flows to all other AEs during the GFC. Such results indicate the possibility of equity fund flows working as a channel of cross-market VRP spillovers.
Author: John H. Cochrane
Publisher: Now Publishers Inc
ISBN: 1933019158
Category : Business & Economics
Languages : en
Pages : 117
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Book Description
Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Author: Michael Donadelli
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
The average equity risk premium (ERP) in emerging markets is well-known to be significantly higher than in developed markets. But, key reasons for this remain unclear, contributing to investment strategy uncertainty. Here, we use industry-level data for 19 emerging market countries across three regions of the world to first examine the contribution of each industrial stock market to the extra premium paid by emerging markets to international investors from 1995 to present, and then to explore the relative importance of country-level governance and macroeconomic policy uncertainty in explaining both national and regional industry-by-industry ERP behaviour. We conduct separate analyses for the emerging mar- ket crises period of 1995-2002, and the post-crises period of 2003-2012. Based on both static and dynamic approaches, we find that some industries indeed perform consistently better than others. In particular: (i) the healthcare and basic materials industries mostly contributed to the extra premium paid by the Asian stock market; and (ii) the East European and Latin American stock markets' extra performances were largely driven by the utilities and consumer services industries, respectively. However, our cross-sectional analyses sug- gest that country-level governance indicators are not strongly correlated with either national or industry-level returns, with the exception of the consumer services industry. Lastly, using both rolling-window and DCC-GARCH frameworks, we find that correlations between industrial stock market excess returns and a measure of global economic policy uncertainty are consistently negative, and follow similar patterns. Our empirical evidence as a whole suggests that industrial stock markets are more highly related both within and across countries and regions than has been suggested previously. Contrary to much existing empirical work, our results therefore suggest there is little space in emerging markets to exploit cross- industry portfolio diversification benefits.
Author: Joost Driessen
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
Jump and volatility risk are important for understanding equity returns, option pricing and asset allocation. This paper is the first to study international integration of markets for jump and volatility risk, using data on index options for each of the three main global markets: US Samp;P 500 index options), Europe (FTSE index options) and Asia (Nikkei index options). To explain the cross-section of expected returns on these options across strikes and maturities, we focus on return-based multi-factor models, using returns on straddles and out-of-the-money put options as proxies for volatility and jump risk factors. For each market separately, we provide evidence that volatility and jump risk are priced risk factors. There is little evidence, however, of global unconditional pricing of jump and volatility risk. We then investigate the presence of time-variation in the cross-market relationships and find evidence that UK and US option markets have become increasingly interrelated. Incorporating these time-varying patterns in conditional factor pricing models improves their fit substantially and generates some evidence of international pricing. Finally, we show that the benefits of diversifying jump and volatility risk internationally are substantial, but declining over our sample, in line with the hypothesis of increased but imperfect integration of world markets for jump and volatility risk.
Author: Stuart Doole
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
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Book Description
The equity risk premium arises from the link between equities as an asset, and corporate profitability and growth. In this paper, we review the concept and measurement of the equity risk premium against a background of recent practitioner debate concerning the suitability of equities for long-term institutional investors. We consider the competing versions of the equity risk premium that are quoted by academics and practitioners, highlight issues of estimation and consider how they can be addressed robustly.We conclude that equities as an asset class offer a robust return premium over long-dated bonds of the order of 2.5% to 3% per annum globally. This is an estimate which adjusts for the experienced changes in market valuations, and is based on detailed empirical analysis of many equity markets over more than 100 years. Diversified exposure to a basket of global equity markets is most likely to deliver this estimated risk premium over time, rather than a concentrated single-country portfolio.Against the same background, we also revisit the debate over time-diversification i.e. the term-structure of the volatility of asset classes with investment horizon. We conclude that the mean-reversion in equity market valuations drives that of equity returns and this mean-reversion directly ensures that the volatility of equities decreases with longer investor time horizons. Hence, in practice, the 'shortfall' risk of equities is less serious than often thought by investors and especially compared with other assets such as bonds when investing for the long-term i.e. over full business or economic cycles.
