Risk premia in international equity markets revisited

Stephen Jeffrey Brown, Takato Hiraki, Kiyoshi Arakawa, Saburo Ohno

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

Recent evidence suggests that global equity markets are becoming more risky. We develop a model to explain risk premia in international equity markets. The model is then used to investigate the changing nature of conditional risk premia and their effect on unconditional global risk. Using this model we find that the increase in international variance and covariance of realized excess returns can be attributed to systematic variations in global risk premia correlated across markets as well. Understanding this additional source of increased global correlation is important. These results have interest both for practitioners and for those interested in modeling global asset prices.
Original languageEnglish
Pages (from-to)295 - 318
Number of pages24
JournalPacific Basin Finance Journal
Volume17
Issue number3
Publication statusPublished - 2009

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