Dynamic and Stochastic Instability and the Unbiased Forward Rate Hypothesis: A Variable Mean Response Approach

Winston T. Lin
Additional contact information
Winston T. Lin: State University of New York at Buffalo, U.S.A.

Multinational Finance Journal, 1999, vol. 3, issue 3, 173-221

Abstract: This paper examines how determinants of volatility and stock returns change with financial crisis. The contributions of the paper are twofold. First, using a GARCH-M framework, risk and return are jointly modeled by using macroeconomic variables both in the variance and the mean equations. The conditional variance equation is specified by including macro-economic variables, a relevant information set for emerging economies, that is often overlooked in various GARCH specifications. Second, determinants of risk and return are investigated before during and after a major financial crisis at ISE. We show that, both the determinants of risk and the risk-return relationship change as the economy switches from one regime to the other.

Keywords: currency betas; five special tests; four-step generalized least squares; mean and variance shifts; the unbiasedness hypothesis; variable-mean-response random coefficients models (search for similar items in EconPapers)
JEL-codes: F31 F37 F47 G15 (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.mfsociety.org/modules/modDashboard/uplo ... n1al41k11qlefg84.pdf
http://www.mfsociety.org/modules/modDashboard/uplo ... ogleScholar/670.html

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:3:y:1999:i:3:p:173-221

Access Statistics for this article

Multinational Finance Journal is currently edited by Panayiotis C. Andreou

More articles in Multinational Finance Journal from Multinational Finance Journal Contact information at EDIRC.
Bibliographic data for series maintained by Theodossiou Panayiotis ().