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Risk premia in international equity markets revisited

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  • Brown, Stephen J.
  • Hiraki, Takato
  • Arakawa, Kiyoshi
  • Ohno, Saburo

Abstract

Recent evidence suggests that global equity markets are becoming more risky. We develop a model to explain risk premia in international equity markets. The model is then used to investigate the changing nature of conditional risk premia and their effect on unconditional global risk. Using this model we find that the increase in international variance and covariance of realized excess returns can be attributed to systematic variations in global risk premia correlated across markets as well. Understanding this additional source of increased global correlation is important. These results have interest both for practitioners and for those interested in modeling global asset prices.

Suggested Citation

  • Brown, Stephen J. & Hiraki, Takato & Arakawa, Kiyoshi & Ohno, Saburo, 2009. "Risk premia in international equity markets revisited," Pacific-Basin Finance Journal, Elsevier, vol. 17(3), pages 295-318, June.
  • Handle: RePEc:eee:pacfin:v:17:y:2009:i:3:p:295-318
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    References listed on IDEAS

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    Cited by:

    1. Hiraki, Takato & Liu, Ming & Wang, Xue, 2015. "Country and industry concentration and the performance of international mutual funds," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 297-310.
    2. repec:bla:eufman:v:21:y:2015:i:2:p:236-264 is not listed on IDEAS

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