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Global risk aversion and emerging market return comovements

Author

Listed:
  • Demirer, Riza
  • Omay, Tolga
  • Yuksel, Asli
  • Yuksel, Aydin

Abstract

Utilizing the recently developed measure of global risk aversion by Xu (2017), we show that global risk aversion is a significant determinant of international equity correlations, consistently across all emerging markets examined. The positive effect of risk aversion on emerging market comovements is particularly strong for South Africa and Turkey and is consistent with contagion effects. The results underscore the importance of non-cash flow shocks in models of contagion and portfolio risk.

Suggested Citation

  • Demirer, Riza & Omay, Tolga & Yuksel, Asli & Yuksel, Aydin, 2018. "Global risk aversion and emerging market return comovements," Economics Letters, Elsevier, vol. 173(C), pages 118-121.
    • Handle: RePEc:eee:ecolet:v:173:y:2018:i:c:p:118-121
    DOI: 10.1016/j.econlet.2018.09.027
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    References listed on IDEAS

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    More about this item

    Keywords

    Time-varying correlation; Risk aversion; International equity markets;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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