 World market risk, country-specific risk and expected returns in international stock marketsTuran G. Bali and Nusret Cakici Journal of Banking & Finance, 2010, vol. 34, issue 6, 1152-1165 Abstract: This paper determines whether the world market risk, country-specific total risk, and country-specific idiosyncratic risk are priced in an international capital asset pricing model (ICAPM). Portfolio-level analyses, country-level cross-sectional regressions, stacked time-series, and pooled panel regressions indicate that the world market risk is not, but country-specific total and idiosyncratic risks are significantly priced in an ICAPM framework with partial integration. This result is robust to different methods for estimating risk measures, different investment horizons, and after controlling for the countries' aggregate dividend yield, earnings-to-price ratios, inflation risk, exchange rate uncertainties, aggregate volatility risk, and past return characteristics. The main findings turn out to be insensitive to the choice of one-factor vs. multifactor models used to estimate systematic and idiosyncratic risk measures. Keywords: International; equity; returns; Country-Specific; risk; Idiosyncratic; risk; Systematic; risk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:6:p:1152-1165 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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