Time-varying global and local sources of risk in Russian stock market

Kashif Saleem () and Mika Vaihekoski ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we study international asset pricing models and pricing of global and local sources of risk in the Russian stock market using weekly data from 1999 to 2006. In our empirical specification, we utilize and extend the multivariate GARCH-M framework of De Santis and Gérard (1998), by allowing conditional local influence as well. Similar to them we find global risk to be time-varying. Currency risk also found to be priced and highly time varying in the Russian market. Moreover, our results suggest that the Russian market is partially segmented and local risk is also priced in the market. The model also implies that the biggest impact on the US market risk premium is coming from the world risk component whereas the Russian risk premium is on average caused mostly by the local and currency risk components.

Keywords: international asset pricing models; segmentation; currency risk; multivariate GARCH-M; Russia (search for similar items in EconPapers)
JEL-codes: G12 F30 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-rmg and nep-tra
Date: 2007-09-10
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http://mpra.ub.uni-muenchen.de/4795/ orginal version
http://mpra.ub.uni-muenchen.de/5787/ revised version

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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:4795

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