Pricing Currency Risk in Two Interlinked Stock Markets

Jan Antell, Mika Vaihekoski

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

Sammanfattning

We investigate the role of currency risk on stock markets in two interlinked Nordic countries exhibiting a gradual move from fixed to floating exchange rate regime. Tests are conducted for a conditional asset pricing model using the Ding and Engle (2001) specification which allows estimation of multivariate GARCH-in mean models. Using a sample period from 1970 to 2009, we find that the currency risk is priced in both stock markets, and that the price and the risk premium are lower after the flotation of the currencies. We also find some evidence of cross-country
exchange rate effects. Our model has many practical applications and can easily be
applied to study other countries, different asset classes, or industries that are closely connected.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftApplied Finance Letters
Volym1
Utgåva1
Sidor (från-till)16-21
Antal sidor6
ISSN2253-5799
StatusPublicerad - 30.09.2012
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

Nyckelord

  • 511 Nationalekonomi
  • KOTA2012

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