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Aggregate Volatility Risk and Empirical Factors: An International Study

Aggregate Volatility Risk and Empirical Factors: An International Study 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Emerging Markets Finance and Trade Taylor & Francis

Aggregate Volatility Risk and Empirical Factors: An International Study

25 pages

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References (51)

Publisher
Taylor & Francis
Copyright
Copyright © Taylor & Francis Group, LLC
ISSN
1558-0938
eISSN
1540-496X
DOI
10.1080/1540496X.2019.1633305
Publisher site
See Article on Publisher Site

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.

Journal

Emerging Markets Finance and TradeTaylor & Francis

Published: Apr 9, 2021

Keywords: Aggregate volatility risk; ICAPM; international stock markets; two-component volatility model; G11; G12; G17

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