Increasing capital market integration has important implications for the calculation of the cost of capital. In an integrated world the cost of capital should be determined using the International Capital Asset Pricing Model rather than the domestic Capital Asset Pricing Model. In this paper we...

Risk premia, peso-problems and market-inefficiencies have been suggested as candidate explanations for the apparent rejection of the unbiased hypothesis. If various explanations interact, a panel approach is called for. In this paper we estimate different panel models, that allow for...

In this paper we empirically investigate to what extent three competing asset pricing models price an individual firm's stock differently in an internationally integrated world: (i) the multifactor ICAPM of Solnik-Sercu including both the global market portfolio and exchange rate risk premiums,...

In this paper we investigate purchasing power parity (PPP) in a panel with 17 countries for the period 1972 through 1996. The novel feature of our panel methodology is that results are invariant to the choice of a benchmark on numeraire currency. In the panel we allow individual country effects...

Using a new survey data set of matched exchange rate and interest rate expectations for eight currencies relative to the German mark, we examine empirically the relationship between exchange rate returns, "news" and risk premia. "News" on interest differentials enters significantly in equations...