Global risk and market conditions

Amir Akbari and Francesca Carrieri

International Review of Economics & Finance, 2023, vol. 83, issue C, 51-70

Abstract: In a large sample of developed and emerging markets, we show in a conditional setting that globally traded assets such as currencies and international bonds can proxy for global state variables. We find that, differently from market risk, intertemporal risk matters particularly at times when global markets are not in normal economic conditions. Relying on time-variation for prices of risk helps us capture the hedging component, especially the negative one, stemming from proxies like the yen and global sovereign bonds. Our results show that global uncertainty measured by realized world volatility is an important channel for intertemporal risk.

Keywords: International finance; Foreign exchange rate risk; Intertemporal risk (search for similar items in EconPapers)
JEL-codes: F21 F31 G12 G15 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:83:y:2023:i:c:p:51-70

DOI: 10.1016/j.iref.2022.08.012

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