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Global risk aversion and emerging market return comovements

Riza Demirer (), Tolga Omay (), Asli Yuksel and Aydin Yuksel

Economics Letters, 2018, vol. 173, issue C, 118-121

Abstract: Utilizing the recently developed measure of global risk aversion by Xu (2017), we show that global risk aversion is a significant determinant of international equity correlations, consistently across all emerging markets examined. The positive effect of risk aversion on emerging market comovements is particularly strong for South Africa and Turkey and is consistent with contagion effects. The results underscore the importance of non-cash flow shocks in models of contagion and portfolio risk.

Keywords: Time-varying correlation; Risk aversion; International equity markets (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Date: 2018
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