How big is the premium for currency risk (1998)
| Venue: | Journal of Financial Economics |
| Citations: | 52 - 2 self |
BibTeX
@ARTICLE{Santis98howbig,
author = {Giorgio De Santis and Bruno Gérard and We Thank Geert Bekaert and Tim Bollerslev and Peter Bossaerts and Mark Carhart and John Cochrane and Hodrick (the Referee and Olivier Ledoit and John Matsusaka and Hans Mikkelsen and Angel Serrat},
title = {How big is the premium for currency risk},
journal = {Journal of Financial Economics},
year = {1998},
pages = {375--412}
}
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Abstract
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
