Global macroeconomic shocks, time-varying covariances and tests of the international CAPM
UNSPECIFIED. (1996) Global macroeconomic shocks, time-varying covariances and tests of the international CAPM. APPLIED ECONOMICS LETTERS, 3 (2). pp. 109-113.Full text not available from this repository.
The mean variance efficiency (MVE) of a portfolio of international bonds and equities is tested using a CAPM model of excess returns. The conditional variances and covariances of the portfolio returns are allowed to time-vary according to shocks in up to three global macro-economic variables simultaneously. Athough the hypothesis of MVE is easily rejected within a static version of the CAPM this is not the case at conventional significance levels in the CAPM with macro-economic shocks. Results suggest that there exists a dominant role for US macroeconomic disturbances for international capital markets. Integrating macro-economic disturbances more fully into the CAPM may provide theory-consistent models which do not rely solely upon time-series representations of time-varying return variances and covariances such as ARCH.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Journal or Publication Title:||APPLIED ECONOMICS LETTERS|
|Number of Pages:||5|
|Page Range:||pp. 109-113|
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