Financial integration and currency risk premium in CEECs: Evidence from the ICAPM

Boubakri, Salem; Guillaumin, Cyriac

doi:10.1016/j.ememar.2011.08.001

Cited by 13 publications

(7 citation statements)

References 77 publications

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“…In contrast to Büttner and Hayo [4] as well as Yang and Hamori [7,8], however, we provided the dynamic process of dependence between the CEEC-3 and Germany and showed that the positive and negative news affected dependence dynamically. Figures 7 and 8 also confirmed that financial contagion occurred during the global financial and European debt crises, consistent with the evidence provided by Boubakri and Guillaumin [14]. …”

Section: -Year 5-year 10-yearsupporting

confidence: 79%

“…Meanwhile, Oh and Patton [12] and Creal and Tsey [13] provided evidence that the GAS model could be employed with high dimensional copula to investigate the interdependence among different assets. With regard to the topics of the present study, Boubakri and Guillaumin [14] provided evidence that financial integration was not perfect, but was increasing based on the dynamic correlation of the foreign exchange rate. Furthermore, they also showed that financial contagion occurred during the global financial crisis.…”

Section: Introductionmentioning

confidence: 99%

“…Meanwhile, the significant increase in correlation before EU accession may have been caused by the expectations of market participants and requirements of being EU members. After the global financial crisis, there was a significant decrease in dependence, perhaps because of capital regulations and market segmentation [14]. Dynamic correlations between Poland and Germany.…”

Section: -Year 5-year 10-year Gaussian Copula Modelmentioning

confidence: 99%

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Dependence Structures and Systemic Risk of Government Securities Markets in Central and Eastern Europe: A CoVaR-Copula Approach

2018

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Abstract:In this study, we proposed a new empirical method by combining generalized autoregressive score functions and a copula model with high-frequency data to model the conditional time-varying joint distribution of the government bond yields between Poland/Czech Republic/Hungary, and Germany. Capturing the conditional time-varying joint distribution of these bond yields allowed us to precisely measure the dependence of the government securities markets. In particular, we found a high dependence of these government securities markets in the long term, but a low dependence in the short term. In addition, we report that the Czech Republic showed the highest dependence with Germany, while Hungary showed the lowest. Moreover, we found that the systemic risk dynamics were consistent with the idea that the global financial crisis not only had spillover effects on countries with weak economic fundamentals (e.g., Hungary, which had the highest systemic risk), but also had contagion effects for both CEEC-3 countries and Germany. Finally, we confirm that three major market events, namely the EU accession, the global financial crisis, and the European debt crisis, caused structural changes to the dynamic correlation.

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Section: -Year 5-year 10-yearsupporting

confidence: 79%

Section: Introductionmentioning

confidence: 99%

Section: -Year 5-year 10-year Gaussian Copula Modelmentioning

confidence: 99%

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Dependence Structures and Systemic Risk of Government Securities Markets in Central and Eastern Europe: A CoVaR-Copula Approach

2018

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“…While it is customary in most international portfolio studies to take the perspective of the US versus the local investor, doing so also overcomes the effects that domestic exchange rate changes may have on international portfolio diversification where the objective is diversification of systematic risk, not exchange risk. The use of a common currency also avoids concerns of possible effects introduced into the empirical analysis from factors such as central bank intervention aimed at strategic objectives such as currency stability (Boubakri and Guillaumin, 2011;Cavoli et al, 2012;De Santis et al, 2003). Nonetheless there are disadvantages to measuring returns in US$.…”

Section: Introductionmentioning

confidence: 99%

Time Varying Asian Stock Market Integration

Batten

Morgan

Szilagyi

2015

Singapore Econ. Rev.

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We employ an asset pricing framework with varying estimation lengths to show that there has been an increasing degree of integration between Asian and international stock markets, but very little with Japan. This finding is consistent with prior studies and highlights the impact of recent regulatory and economic reform undertaken throughout the region. Our results show that instability in the asset variance structure underpins the observed varying degrees of financial market integration. In particular, modeling integration using shorter estimation periods helps explain the time varying nature of financial market integration and the benefits that may accrue to international and domestic investors.

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“…For instance, Adler and Dumas (1983) developed a theoretical model showing that in the presence of deviations from purchasing power parity (PPP), stock returns should include an exchange risk premium in addition to the traditional market risk premium. This is particularly relevant for emerging markets where empirical evidence suggests that asset pricing models may be misspecified if they do not include foreign currency risk premia (Phylaktis and Ravazzolo, 2004;Boubakri and Guillaumin, 2011).…”

Section: Introductionmentioning

confidence: 98%