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Aggregate Volatility Risk and Empirical Factors: An International Study

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  • Woongki Lee
  • James L. Park
  • Bumjean Sohn

Abstract

We study the aggregate volatility risk in international stock markets. We examine four regional (North America, Europe, Japan, and Asia Pacific) stock markets to see if the aggregate volatility risk is priced and find out its relationship with regional empirical factors. We find that the aggregate volatility risk is priced robustly across stocks in all regions but Japan. Within the intertemporal capital asset pricing model framework, we show that the aggregate volatility risk is closely connected with the momentum profits. Our theoretical framework coupled with the return and volatility spillover effects hints at an interesting explanation for the coexistence of global and local factors.

Suggested Citation

  • Woongki Lee & James L. Park & Bumjean Sohn, 2021. "Aggregate Volatility Risk and Empirical Factors: An International Study," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(5), pages 1489-1513, April.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:5:p:1489-1513
    DOI: 10.1080/1540496X.2019.1633305
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    Cited by:

    1. Wang, Ze & Gao, Xiangyun & Huang, Shupei & Sun, Qingru & Chen, Zhihua & Tang, Renwu & Di, Zengru, 2022. "Measuring systemic risk contribution of global stock markets: A dynamic tail risk network approach," International Review of Financial Analysis, Elsevier, vol. 84(C).

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