Time-Varying Currency Betas: Evidence from Developed and Emerging Markets
AbstractThis paper examines the conditional time-varying currency betas from five developed markets and four emerging markets. A trivariate BEKK-GARCH-in-mean model is used to estimate the timevarying conditional variance and covariance of returns of stock index, the world market portfolio and changes in bilateral exchange rate between the US dollar and the local currency of each country. It is found that currency betas are more volatile than those of the world market betas. Currency betas in emerging markets are more volatile than those in developed markets. Moreover, we find evidence of long-memory in currency betas. The usefulness of time-varying currency betas are illustrated by two applications.
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Bibliographic InfoPaper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0903.
Length: 34 pages
Date of creation: Oct 2009
Date of revision:
time-varying currency betas; multivariate GARCH-M models; international CAPM; fractionally integrated processes; stochastic dominance;
Other versions of this item:
- Prabhath Jayasinghe & Albert K. Tsui, 2009. "Time-Varying Currency Betas : Evidence from Developed and Emerging Markets," Finance Working Papers 22761, East Asian Bureau of Economic Research.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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