期刊
MANAGEMENT SCIENCE
卷 67, 期 11, 页码 7262-7289出版社
INFORMS
DOI: 10.1287/mnsc.2020.3780
关键词
asset pricing; investment; portfolio; foreign exchange rate
Empirical evidence suggests that innovation in global equity correlation serves as a viable pricing factor in international markets. A stylized model and simple measurement method demonstrate the robust negative price of risk and improved cross-sectional fits across various asset classes. Additionally, the study explores the factor's pricing ability in the FX market and reveals the link between international equity and currency markets through global equity correlations.
We present empirical evidence that the innovation in global equity correlation is a viable pricing factor in international markets. We develop a stylized model to motivate why this is a reasonable candidate factor and propose a simple way to measure it. We find that our factor has a robust negative price of risk and significantly improves the joint cross-sectional fits across various asset classes, including global equities, commodities, sovereign bonds, foreign exchange rates, and options. In exploring the pricing ability of our factor on the FX market, we also shed light on the link between international equity and currency markets through global equity correlations as an instrument for aggregate risks.
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