Global Risk and Market Conditions

55 Pages Posted: 16 Apr 2015 Last revised: 6 Apr 2022

See all articles by Amir Akbari

Amir Akbari

McMaster University - Michael G. DeGroote School of Business

Francesca Carrieri

McGill University - Desautels Faculty of Management

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Date Written: April 1, 2015

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.

Keywords: Exchange rate risk, intertemporal risk, Developed markets, Emerging Markets

JEL Classification: G15, F31

Suggested Citation

Akbari, Amir and Carrieri, Francesca, Global Risk and Market Conditions (April 1, 2015). Available at SSRN: https://ssrn.com/abstract=2594533 or http://dx.doi.org/10.2139/ssrn.2594533

Amir Akbari

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Francesca Carrieri (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-1582 (Phone)
514-398-3876 (Fax)

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