International asset pricing and portfolio diversification with time-varying risk

• 成果类型: Article
• 署名作者: DeSantis, G; Gerard, B
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.1997.tb02745.x
• 发表日期: 1997
• 页码: 1881-1912
• 关键词: FOREIGN-EXCHANGE; stock markets; GENERALIZED ARCH; Equity returns; WORLD PRICE; MODEL; volatility; tests; COVARIANCES; premium

摘要

We test the conditional capital asset pricing model (CAPM) for the worlds eight largest equity markets using a parsimonious generalized autoregressive conditional heteroskedasticity (GARCH) parameterization. Our methodology can be applied simultaneously to many assets and, at the same time, accommodate general dynamics of the conditional moments. The evidence supports most of the pricing restrictions of the model, but some of the variation in risk-adjusted excess returns remains predictable during periods of high interest rates. Our estimates indicate that, although severe market declines are contagious, the expected gains from international diversification for a U.S. investor average 2.11 percent per year and have not significantly declined over the last two decades.