How big is the premium for currency risk?

• 成果类型: Article
• 署名作者: De Santis, G; Gerard, B
• 署名单位: University of Southern California
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(98)00029-4
• 发表日期: 1998
• 页码: 375-412
• 关键词: international asset pricing; Currency risk; multivariate GARCH

摘要

We estimate and test the conditional version of an International Capital Asset Pricing Model using a parsimonious multivariate GARCH process. Since our approach is fully parametric, we can recover any quantity that is a function of the first two conditional moments. Our findings strongly support a model which includes both market and foreign exchange risk. However, both sources of risk are only detected when their prices are allowed to change over time. The evidence also indicates that, with the exception of the U.S, equity market, the premium for bearing currency risk often represents a significant fraction of the total premium. (C) 1998 Elsevier Science S.A. All rights reserved.