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Time Variation And Asymmetry In The World Price Of Covariance Risk: The Implications For International Diversification

Author

Listed:
  • Olan T. Henry
  • Nilss Olekalns
  • Kalvinder Shields

Abstract

The International Capital Asset Pricing Model measures country risk in terms of the conditional covariance of national returns with the world return. Using impulse responses from a multivariate nonlinear model we provide evidence of time variation and asymmetry in the measure of country risk. and the implied benefit to international diversification. The evidence implies that the price of risk and the benefits from diversification may differ in a statistically and economically meaningful fashion across bull and bear markets.

Suggested Citation

  • Olan T. Henry & Nilss Olekalns & Kalvinder Shields, 2004. "Time Variation And Asymmetry In The World Price Of Covariance Risk: The Implications For International Diversification," Department of Economics - Working Papers Series 907, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:907
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    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-04/907.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Generalised Impulse Responses; Asymmetry; International Capital Asset Pricing Model.;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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