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Global risk and market conditions

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  • Akbari, Amir
  • Carrieri, Francesca

Abstract

In a large sample of developed and emerging markets, we show in a conditional setting that globally traded assets such as currencies and international bonds can proxy for global state variables. We find that, differently from market risk, intertemporal risk matters particularly at times when global markets are not in normal economic conditions. Relying on time-variation for prices of risk helps us capture the hedging component, especially the negative one, stemming from proxies like the yen and global sovereign bonds. Our results show that global uncertainty measured by realized world volatility is an important channel for intertemporal risk.

Suggested Citation

  • Akbari, Amir & Carrieri, Francesca, 2023. "Global risk and market conditions," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 51-70.
    • Handle: RePEc:eee:reveco:v:83:y:2023:i:c:p:51-70
    DOI: 10.1016/j.iref.2022.08.012
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    More about this item

    Keywords

    International finance; Foreign exchange rate risk; Intertemporal risk;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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