Global Risk and Market Conditions

55 Pages Posted: 29 Mar 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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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: International Finance, Foreign Exchange Rate Risk, Intertemporal Risk

Suggested Citation

Akbari, Amir and Carrieri, Francesca, Global Risk and Market Conditions. Available at SSRN: https://ssrn.com/abstract=4069711 or http://dx.doi.org/10.2139/ssrn.4069711

Amir Akbari (Contact Author)

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

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Canada

Francesca Carrieri

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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