The impact of exchange rate risk on international asset pricing under various market structures

Bayraktar, Sema

doi:10.1007/s11156-008-0089-4

Cited by 5 publications

(4 citation statements)

References 33 publications

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“…On the other hand, the model used in the current study itself determines which currencies should be included in an empirical test, thus avoids this kind of bias. Along with the lines of the theory by Bayraktar (2000 and2009), in the empirical tests of each country the real exchange risks of this particular country's leading trading partners have been included. Therefore, any biases that may occur due to random selection of currency risks have been avoided.…”

Section: Discussionmentioning

confidence: 99%

“…This study also attempts to test the conditional version of the international assetpricing model proposed in (Bayraktar, 2009;Bayraktar, 2000) by using a parsimonious multivariate GARCH process. Time varying characteristic of the risks are analyzed by testing the model on both full-sample and sub-samples basis.…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

“…Final section concludes the paper. Bayraktar (2000 and2009) provide a theoretical model to examine the impact of exchange rate risk under various forms of market segmentation/integration; namely segmented, mildly segmented and integrated. For that purpose, in a meanvariance framework, a two-country, two-period, two-goods model is analyzed assuming that Purchasing Power Parity holds 1 .…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

“…The return equations are a little bit different from the ones given inBayraktar (2009). Here I use the equations without having the risk-free rate.…”

mentioning

confidence: 99%

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International Asset Pricing, Currency Risk and Integration of Markets

Bayraktar

2014

EJBE

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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.

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Section: Discussionmentioning

confidence: 99%

Section: Introduction and Literature Reviewmentioning

confidence: 99%

Section: Introduction and Literature Reviewmentioning

confidence: 99%

“…The return equations are a little bit different from the ones given inBayraktar (2009). Here I use the equations without having the risk-free rate.…”

mentioning

confidence: 99%

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International Asset Pricing, Currency Risk and Integration of Markets

Bayraktar

2014

EJBE

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Australia’s equity home bias and real exchange rate volatility

Mishra

2010

Rev Quant Finan Acc

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This paper examines the impact of real exchange rate volatility on Australia's equity home bias by employing, International Monetary Fund's high quality dataset (2001 to 2006) on cross border equity investment. The paper finds some interesting trends in Australia's equity home bias. The paper uses different control measures and also conducts generalised method of moments robustness tests, to examine the role of real exchange rate volatility in Australia's equity home bias. The paper finds that real exchange rate volatility is a potential driver of Australia's equity home bias.JEL Classifications: G11, G15, G18 Keywords: coordinated portfolio investment survey; float home bias; real exchange rate volatility; generalised method of moments. (1994) state that the domestic ownership share of the world's eight major stock markets: US (98 %), Japan (86.7 %), UK (78.5 %), Germany (75.4 %), France (64.4 %), Italy (91.0%), Spain (94.2%) and Sweden (100.0%). The share of domestic equities in the world market portfolio for these eight stock markets is: US (36.4 %), Japan (43.7 %), UK (10.3 %), Germany (3.2 %), France (2.6 %), Italy (1.9 %), Spain (1.1 %) and Sweden (0.8 %). This is contrary to the traditional international capital asset pricing model (ICAPM) which predicts that an investor should hold equities from a country as per that country's share of world market capitalisation (Sharpe (1964) andLintner (1965)). This phenomenon is termed as "home bias". Mishra (2008) state that in the year 2005, United States actual share in Australia's equity portfolio is 11.076 %, whereas the ICAPM benchmark percentage is 32.836 %.

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