In this paper, we develop a modified uncovered equity parity (UEP) that incorporates time-varying
risk aversion on the basis of international portfolio decision by investors characterized with time-varying
risk aversion. The modified UEP emphasizes the role of time-varying risk aversion in associating
exchange rate movements with equity returns. We analyze multi-country real data and obtain empirical
evidence that supports the modified UEP. In addition, we use a portfolio approach to provide
supplementary evidences and find that accounting for time-varying risk aversion in currency investments
would be useful for improving portfolio performance.
Keywords : Exchange Rates, Equity Returns, Time-varying Risk Aversion, Uncovered Equity Parity
학회소식
[2017년 제 1차] Exchange Rates, Equity Returns, and Time-varying Risk Aversion: A modified Uncovered Equity Parity
작성자 : 관리자
조회수 : 992
게시일 :
2017-03-02
