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Measuring Time-varying Market and Currency Risks with Stochastic Dominance: Evidence from Country Level Stock Returns

Sri Lanka Journal of Business Economics

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Title Measuring Time-varying Market and Currency Risks with Stochastic Dominance: Evidence from Country Level Stock Returns
 
Creator Jayasinghe, Prabhath
 
Description In this paper, time-varying market and currency risks among a selected set of developed and emerging economies are compared in terms of stochastic dominance. For this purpose, time-varying exchange rate exposure and market betas are obtained through a multivariate model that explicitly allows for time-varying second moments. Two betas are not assumed to be orthogonal and we explicitly allow for non-orthogonality. The cumulative distribution functions of time-varying betas in the sample indicate that stock returns in emerging economies are more exposed to currency risk, though their exposure to market risk is moderate. On the contrary, the stock returns in developed economies are more exposed to market risk while their exposure to currency risk is remarkably low. There is also evidence to establish the notion that, during the postcurrency crisis period, currency risk in Korea is fading out over time.
 
Publisher University of Sri Jayewardenepura
 
Contributor —
 
Date 2019-03-18
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://journals.sjp.ac.lk/index.php/sljbe/article/view/3826
 
Source Sri Lanka Journal of Business Economics; Vol 4 (2013)
ISSN 1391 – 9601
 
Language eng
 
Relation http://journals.sjp.ac.lk/index.php/sljbe/article/view/3826/3024
 
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