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Determinants of the time varying risk premia

Pornpinun Chantapacdepong

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: This paper generates monthly risk premia data using zero coupon government treasury bills for 43 countries over the period of 1994-2006. The measure of risk premia is based on the ARCH-in-Mean (ARCH-M) model introduced by Engle, Lilien and Robins (1987). We show that the risk premia are time varying and also vary considerably across sample countries. Countries with better financial development and higher income generally have lower risk premia of government assets. This study also examines the macroeconomic and political determinants of the risk premia by using cross-section and dynamic panel regression analyses. The results show that the risk premia are significantly affected by macroeconomic circumstances, especially economic growth and the real e¤ective exchange rate. The results are robust across the majority of countries in our study.

Keywords: ARCH-in-Mean; term structure of interest rates; risk premium; dynamic panel regression analysis. (search for similar items in EconPapers)
JEL-codes: E43 E44 G12 G15 (search for similar items in EconPapers)
Pages: 96 pages
Date: 2007-03
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-mac and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:07/597

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