Global Financial Markets and the Risk Premium on U.S. Equity
We document that there is a significant foreign influence on the risk premium of U.S. assets. Using a bivariate GARCH-in-mean process for conditional expected excess returns, we find that the conditional expected excess return on U.S. stocks is positively related to the conditional covariance of the return of these stocks with the return on a foreign index but is not related to its own conditional variance. Further, we are unable to reject the international version of the CAPM. Evidence is presented for different model specifications, multiple-day returns and alternative proxies of foreign stock returns including the Nikkei 225 Stock Average, Morgan Stanley Japan and Morgan Stanley EAFE indices.
Year of publication: |
1992-05
|
---|---|
Authors: | Chan, K.C. ; Karolyi, G. Andrew ; Stulz, Rene M. |
Institutions: | National Bureau of Economic Research (NBER) |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Information, Trading and Stock Returns: Lessons from Dually-Listed Securities
Chan, K.C., (1994)
-
Why Do Countries Matter So Much for Corporate Governance?
Karolyi, G. Andrew, (2004)
-
A New Approach to Measuring Financial Contagion
Bae, Kee-Hong, (2000)
- More ...