Application of Intertemporal CAPM on International Corporate Finance

Jow-Ran Chang, Mao-Wei Hung and Cheng Few Lee

Chapter 12 in Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning:(In 4 Volumes), 2020, pp 485-517 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter discusses both intertemporal asset pricing model and international asset pricing model (IAPM) in detail. In intertemporal asset pricing model we discuss Campbell (1993) model which assumes that investors are assumed to be endowed with Kreps–Porteus utility and consumption is substituted out from the model. In addition, it extends Campbell’s (1993) model to develop an intertemporal IAPM. We show that the expected international asset return is determined by a weighted average of market risk, market hedging risk, exchange rate risk and exchange rate hedging risk. A test of the conditional version of our intertemporal IAPM using a multivariate GARCH process supports the asset pricing model. We find that the exchange rate risk is important for pricing international equity returns and it is much more important than intertemporal hedging risk.

Keywords: Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data (search for similar items in EconPapers)
JEL-codes: C01 C1 G32 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789811202391_0012 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789811202391_0012 (text/html)
Ebook Access is available upon purchase.

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:wsi:wschap:9789811202391_0012

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().