Details
| Original language | English |
|---|---|
| Pages (from-to) | 244-259 |
| Number of pages | 16 |
| Journal | Journal of International Money and Finance |
| Volume | 93 |
| Publication status | Published - May 2019 |
Abstract
We examine the pricing of tail risk in international stock markets. Studying all MSCI Developed and Emerging Markets countries, we find that the tail risk of these countries is highly integrated. We find that both local and our newly computed global tail risk strongly predict global equity index excess returns. These results hold both in-sample and out-of-sample. Sorting countries into portfolios by their tail risk generates sizable excess returns across various holding periods. Finally, we find that global tail risk is linked to international economic activity.
Keywords
- Factor models, International Asset Pricing, International Stock Market Returns, Jump risk, Return predictability, Tail risk
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of International Money and Finance, Vol. 93, 05.2019, p. 244-259.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - International tail risk and World Fear
AU - Hollstein, Fabian
AU - Nguyen, Duc Binh Benno
AU - Prokopczuk, Marcel
AU - Wese Simen, Chardin
PY - 2019/5
Y1 - 2019/5
N2 - We examine the pricing of tail risk in international stock markets. Studying all MSCI Developed and Emerging Markets countries, we find that the tail risk of these countries is highly integrated. We find that both local and our newly computed global tail risk strongly predict global equity index excess returns. These results hold both in-sample and out-of-sample. Sorting countries into portfolios by their tail risk generates sizable excess returns across various holding periods. Finally, we find that global tail risk is linked to international economic activity.
AB - We examine the pricing of tail risk in international stock markets. Studying all MSCI Developed and Emerging Markets countries, we find that the tail risk of these countries is highly integrated. We find that both local and our newly computed global tail risk strongly predict global equity index excess returns. These results hold both in-sample and out-of-sample. Sorting countries into portfolios by their tail risk generates sizable excess returns across various holding periods. Finally, we find that global tail risk is linked to international economic activity.
KW - Factor models
KW - International Asset Pricing
KW - International Stock Market Returns
KW - Jump risk
KW - Return predictability
KW - Tail risk
UR - http://www.scopus.com/inward/record.url?scp=85060907666&partnerID=8YFLogxK
U2 - 10.1016/j.jimonfin.2019.01.004
DO - 10.1016/j.jimonfin.2019.01.004
M3 - Article
AN - SCOPUS:85060907666
VL - 93
SP - 244
EP - 259
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
SN - 0261-5606
ER -