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International Asset Pricing and World Market Integration : Evidence from a Partially Integrated ICAPM with Asymmetric Effects

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  • Arouri Mohamed El Hedi

    (MODEM)

Abstract

This paper tests a partially Segmented ICAPM using an asymmetric multivariate GARCH specification for two developed markets, two emerging markets and World market. We find that this asymmetric process provides a significantly better fit of the data than a standard symmetric process. The evidence supports the financial integration hypothesis and suggests that domestic risk is not a priced factor.

Suggested Citation

  • Arouri Mohamed El Hedi, 2004. "International Asset Pricing and World Market Integration : Evidence from a Partially Integrated ICAPM with Asymmetric Effects," International Finance 0410001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpif:0410001
    Note: Type of Document - pdf; pages: 10
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/0410/0410001.pdf
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    References listed on IDEAS

    as
    1. Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-131, February.
    2. Gerard, Bruno & Thanyalakpark, Kessara & Batten, Jonathan A., 2003. "Are the East Asian markets integrated? Evidence from the ICAPM," Journal of Economics and Business, Elsevier, vol. 55(5-6), pages 585-607.
    3. De Santis, Giorgio & imrohoroglu, Selahattin, 1997. "Stock returns and volatility in emerging financial markets," Journal of International Money and Finance, Elsevier, vol. 16(4), pages 561-579, August.
    4. Bekaert, Geert & Harvey, Campbell R, 1995. " Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-444, June.
    5. Harvey, Campbell R, 1991. " The World Price of Covariance Risk," Journal of Finance, American Finance Association, vol. 46(1), pages 111-157, March.
    6. De Santis, Giorgio & Gerard, Bruno & Hillion, Pierre, 2003. "The relevance of currency risk in the EMU," Journal of Economics and Business, Elsevier, vol. 55(5-6), pages 427-462.
    7. Karolyi, G. Andrew & Stulz, Rene M., 2003. "Are financial assets priced locally or globally?," Handbook of the Economics of Finance,in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 16, pages 975-1020 Elsevier.
    8. Merton, Robert C., 1980. "On estimating the expected return on the market : An exploratory investigation," Journal of Financial Economics, Elsevier, vol. 8(4), pages 323-361, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Financial Integration; Segmentation; ICAPM; Multivariate GARCH;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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