Econometrica Vol. 62 No. 4 1994
Volatility and Links between National Stock Markets
Abstract
The authors attempt to account for the covariances between stock markets and to assess their integration. They estimate a factor model for sixteen national stock market returns whose volatility is induced by changing volatility in the factors. Unanticipated returns depend on innovations in economic variables and 'unobservable' factors. Assets risk premia are linear combinations of the factors risk premia. The authors find that idiosyncratic risk is priced and the 'price of risk' is different across stock markets. Besides, only a small proportion of their covariances can be accounted for by 'observable' economic variables. Correlation changes are driven primarily by movements in 'unobservables.'
- DOI
- 10.2307/2951737
- Volume
- 62
- Issue
- 4
- Pages
- 901
- Sources
- bibtex:phds-export.bib crossref openalex