Global Risk Aversion and Emerging Market Return Comovements
Posted: 23 Oct 2018
Date Written: September 30, 2018
Abstract
Utilizing the recently developed measure of global risk aversion by Xu (2017), we show that global risk aversion is a significant determinant of international equity correlations, consistently across all emerging markets examined. The positive effect of risk aversion on emerging market comovements is particularly strong for South Africa and Turkey and supports the flight-to-safety phenomenon. The results underscore the importance of non-cash flow shocks in models of contagion and portfolio risk.
Keywords: Time-varying correlation, Risk aversion, International equity markets
JEL Classification: C22, G10
Suggested Citation: Suggested Citation
Demirer, Riza and Omay, Tolga and Yuksel, Asli and Yuksel, Sadettin Aydin, Global Risk Aversion and Emerging Market Return Comovements (September 30, 2018). Economics Letters, Forthcoming., Available at SSRN: https://ssrn.com/abstract=3257648
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.