Uncertainty and Downside Risk in International Stock Returns

29 Pages Posted: 24 Feb 2020

See all articles by Nektarios Aslanidis

Nektarios Aslanidis

Universitat Rovira Virgili

Charlotte Christiansen

Aarhus University - CREATES

Georgios P. Kouretas

Athens University of Economics and Business; IPAG Business School

Date Written: January 27, 2020

Abstract

We conduct an international analysis of the cross-sectional risk premiums of uncertainty risk factors in addition to traditional risk factors. We consider the stock markets in five regions separately. Internationally, uncertainty has negative risk premiums which is similar to previous findings for the US. This implies that investors get lower returns for assets with high uncertainty betas. We further contribute with an analysis of downside uncertainty risk. Here, the downside uncertainty risk factor is high uncertainty which has additional risk premiums. We measure uncertainty by the logs of the local and US economic policy uncertainty indices.

Keywords: International stock returns; economic policy uncertainty; Fama- French factor models; downside risk

JEL Classification: G12; G15

Suggested Citation

Aslanidis, Nektarios and Christiansen, Charlotte and Kouretas, Georgios P., Uncertainty and Downside Risk in International Stock Returns (January 27, 2020). Available at SSRN: https://ssrn.com/abstract=3523295 or http://dx.doi.org/10.2139/ssrn.3523295

Nektarios Aslanidis

Universitat Rovira Virgili ( email )

Tarragona
Spain

Charlotte Christiansen (Contact Author)

Aarhus University - CREATES ( email )

Fuglesangs Alle 4
Aarhus V, DK 8210
Denmark

Georgios P. Kouretas

Athens University of Economics and Business ( email )

Department of Business Administration
Athens, GR-10434
Greece

HOME PAGE: http://www.aueb.gr/Users/kouretas/index_en.html

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

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