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Global Market and Currency Risk in Finnish Stock Market

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Author Info
Mika Vaihekoski () (School of Business, Lappeenranta University of Technology, Finland)

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Abstract

Using conditional international asset pricing models, this paper investigates whether global market and currency risks are priced in the Finnish stock market. We take the view of Finnish investors and study the pricing of the market portfolio and industry portfolios using monthly data from 1987 to 2000. The results give strong support for the pricing of the global market risk yet the local market risk is also priced suggesting mild segmentation. We find strong support for the pricing of currency risk. This suggest that Finnish investors should be concerned with the currency risk even when investing in domestic stocks.

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Publisher Info
Article provided by Finnish Economic Association in its journal Finnish Economic Papers.

Volume (Year): 20 (2007)
Issue (Month): 1 (Spring)
Pages: 72-88
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Handle: RePEc:fep:journl:v:20:y:2007:i:1:p:72-88

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Web page: http://www.taloustieteellinenyhdistys.fi
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Related research
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Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Mika Vaihekoski, 1998. "Short-term returns and the predictability of Finnish stock returns," Finnish Economic Papers, Finnish Economic Association, vol. 11(1), pages 19-36, Spring. [Downloadable!]
    Other versions:
  2. Harvey, Campbell R, 1995. "Predictable Risk and Returns in Emerging Markets," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 8(3), pages 773-816. [Downloadable!] (restricted)
    Other versions:
  3. Vassalou, Maria, 2000. "Exchange Rate And Foreign Inflation Risk Premiums In Global Equity Returns," CEPR Discussion Papers 2448, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Vassalou, Maria, 2000. "Exchange rate and foreign inflation risk premiums in global equity returns," Journal of International Money and Finance, Elsevier, vol. 19(3), pages 433-470, June. [Downloadable!] (restricted)
  5. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  6. Kim Nummelin & Mika Vaihekoski, 2002. "World capital markets and Finnish stock returns," European Journal of Finance, Taylor and Francis Journals, vol. 8(3), pages 322-343, September. [Downloadable!] (restricted)
  7. Chan, K. C. & Karolyi, G. Andrew & Stulz, ReneM., 1992. "Global financial markets and the risk premium on U.S. equity," Journal of Financial Economics, Elsevier, vol. 32(2), pages 137-167, October. [Downloadable!] (restricted)
    Other versions:
  8. Dumas, Bernard & Solnik, Bruno, 1995. " The World Price of Foreign Exchange Risk," Journal of Finance, American Finance Association, vol. 50(2), pages 445-79, June. [Downloadable!] (restricted)
  9. Doukas, John & Hall, Patricia H. & Lang, Larry H. P., 1999. "The pricing of currency risk in Japan," Journal of Banking & Finance, Elsevier, vol. 23(1), pages 1-20, January. [Downloadable!] (restricted)
  10. Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Roll, Richard, 1992. " Industrial Structure and the Comparative Behavior of International Stock Market Indices," Journal of Finance, American Finance Association, vol. 47(1), pages 3-41, March. [Downloadable!] (restricted)
  12. Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June. [Downloadable!] (restricted)
  13. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, Oxford University Press, vol. 9(1), pages 19-50, January.
  14. Ferson, Wayne E, 1989. " Changes in Expected Security Returns, Risk, and the Level of Interest Rates," Journal of Finance, American Finance Association, vol. 44(5), pages 1191-1217, December. [Downloadable!] (restricted)
  15. Choi, Jongmoo Jay & Hiraki, Takato & Takezawa, Nobuya, 1998. "Is Foreign Exchange Risk Priced in the Japanese Stock Market?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 361-382, September. [Downloadable!]
  16. Mika Vaihekoski, 2000. "Unconditional international asset pricing models: empirical tests," Finnish Economic Papers, Finnish Economic Association, vol. 13(2), pages 71-88, Autumn. [Downloadable!]
  17. Ferson, Wayne E & Harvey, Campbell R, 1993. "The Risk and Predictability of International Equity Returns," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(3), pages 527-66. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Saleem, Kashif & Vaihekoski, Mika, 2007. "Time-varying global and local sources of risk in Russian stock market," MPRA Paper 4795, University Library of Munich, Germany. [Downloadable!]
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