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Asymmetric impacts of global risk appetite on the risk premium for an emerging market

İbrahim Kanlı

Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, issue 13, 3218-3226

Abstract: This paper analyzes the impact of global risk appetite on the risk premium utilizing high-frequency data. Taking the Turkish economy as our laboratory, we find that the risk premium volatility responds only to a worsening in the risk appetite for the Turkish economy, which is a result that we do not observe for the other emerging markets. Then, we investigate the role of current account dynamics on this asymmetric effect, by focusing also on an economy with similar current account performance. The empirical results find supporting evidence for the role of current account dynamics on the estimated asymmetry.

Keywords: Conditional heteroscedasticity models; Econophysics; Emerging markets; Risk appetite; Risk premium (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:387:y:2008:i:13:p:3218-3226

DOI: 10.1016/j.physa.2008.01.082

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Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

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