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Global Versus Regional Systematic Risk and International Asset Allocations in Asia

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  • Priscilla Swartz

    (Claremont Graduate University)

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    Abstract

    This study decomposes total risk of a MSCI Asian country index returns into three components: world systematic risk, Asian regional systematic risk and country-specific risk. The study finds an Asian country index returns mostly respond to shocks originated within the country. China, Korea and Taiwan index returns are increasingly sensitive to global common shocks notably after the Asian financial crisis, while Japan and India indices are more responsive to regional shocks. These findings have important implications in optimally allocating funds within a global versus a regional portfolio.

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    File URL: http://www.aeconf.net/Articles/May2006/aef070104.pdf
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    Bibliographic Info

    Article provided by Society for AEF in its journal Annals of Economics and Finance.

    Volume (Year): 7 (2006)
    Issue (Month): 1 (May)
    Pages: 77-89

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    Handle: RePEc:cuf:journl:y:2006:v:7:i:1:p:77-89

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    Web page: http://www.aeconf.net/
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    Related research

    Keywords: Systematic risk; Asset allocation; Portfolio management;

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    References

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    1. Seungwook Bahng & Seung-Myo Shin, 2004. "Interactions of stock markets within the greater China economic bloc," Global Economic Review, Taylor & Francis Journals, vol. 33(3), pages 43-60.
    2. Richard Pomfret, 2004. "Sequencing Trade and Monetary Integration: Issues and Applications to Asia," School of Economics Working Papers 2004-14, University of Adelaide, School of Economics.
    3. Wang, Yunjong, 2004. "Financial cooperation and integration in East Asia," Journal of Asian Economics, Elsevier, vol. 15(5), pages 939-955, October.
    4. Chelley-Steeley, Patricia, 2004. "Equity market integration in the Asia-Pacific region: A smooth transition analysis," International Review of Financial Analysis, Elsevier, vol. 13(5), pages 621-632.
    5. Kaminsky, Graciela & Lyons, Richard & Schmukler, Sergio, 2001. "Mutual fund investment in emerging markets - an overview," Policy Research Working Paper Series 2529, The World Bank.
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    Cited by:
    1. Jushan Bai & Shuzhong Shi, 2011. "Estimating High Dimensional Covariance Matrices and its Applications," Annals of Economics and Finance, Society for AEF, vol. 12(2), pages 199-215, November.

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