International determinants of asymmetric dependence in investment returns
51 Pages Posted: 29 Apr 2020 Last revised: 5 Jan 2022
Date Written: November 22, 2021
International investors require additional compensation, charged on top of the systematic risk premium, to hold assets displaying asymmetric dependence in returns. We document that the degree and pricing of asymmetric dependence differs substantially across the 38 markets examined. Asymmetric dependence strengthens in fast-developing equity markets. We propose policy actions aimed at improving firm competition levels through reducing restrictions for new firms to enter financial markets, which may help stabilize markets and reduce conditional risk levels of equities during downturn events.
Keywords: International Asset Pricing, Asymmetric Dependence, State-Dependent Return Correlations
JEL Classification: G12
Suggested Citation: Suggested Citation