This paper examines the conditional time-varying currency betas from five developed markets and four emerging markets. A trivariate BEKK-GARCH-in-mean model is used to estimate the timevarying conditional variance and covariance of returns of stock index, the world market portfolio and changes...

Zero-investment uncovered interest parity (UIP) portfolio positions provide perfect factor-mimicking portfolios for currency risk in the International CAPM context. Their returns are the currency risk premia. Since the UIP positions on average provide low returns, the currency risk premia must...

Standard asset pricing models have difficulty explaining cross-sectional differences in observed equity risk premia of developed and emerging markets. We argue that national equity returns are subject to sample selectivity. The lack of credible commitment to keep capital markets open (risk of...

The downside risk CAPM (DR-CAPM) can price the cross section of currency returns. The market-beta differential between high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also high, than it is conditional on good market returns....

The currency premium is one of the three components of the differential between local and foreign interest rates. Emerging economies such as South Africa typically face positive interest rate differentials, i.e., a higher cost of capital than developed economies. In this paper we aim at...

The relationships among the Mexico EMBI+ and local and foreign risk factors are examined in this paper. The long run relationships and the dynamics are analyzed taking in account the effects of economic slowdowns into the period of the study. Also the volatilities of EMBI+, domestic interest...

This paper makes two contributions to the literature. First, we build on the methodology of Ang and Liu (2004) to model the cost of capital term-structure for firms subject to foreign exchange (FX) risk. We emphasize the role of time-varying parameters such as FX risk and factor loadings....

Monthly data from January 1985 to December 2004 are used to investigate reserves management in ten Asiatic and Latin American countries. Idiosyncratic explanatory variables enter cointegration relationships based on a stochastic buffer stock model, where a reserve variability measure is obtained...