Did the EMS Reduce the Cost of Capital?

Enrique Sentana

39 citations0/0 files storedThe Economic Journal

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Markets and Investment Strategies Global Financial Crisis and Policies Financial Risk and Volatility Modeling

Abstract

We propose a dynamic arbitrage pricing theory (APT) multi‐factor model with time‐varying volatility for currency, bond and stock returns for ten European countries over 1977–97. We exploit the cross‐sectional dimension of the model to construct world portfolios, which when added to the original list of assets, allow us to develop simple consistent methods of estimation and testing. Our results reject the implicit asset pricing restrictions, and suggest decreases in idiosyncratic exchange rate risk tend to lower the cost of capital, although the effect is small. We assess the potential gains from increased stock market integration.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 39 citations exist upstream.

References

1976The arbitrage theory of capital asset pricing 1992Quasi-maximum likelihood estimation and inference in dynamic models with time-varying covariances 1997Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan 1979The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure 1990Volatiltiy and Links Between National Stock Markets 1994Volatility and Links between National Stock Markets 1988Risk and return in an equilibrium APT 1992Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets

Cited by

2019Uncertainty and Economic Activity: A Multicountry Perspective 2014A New Linear Estimator for Gaussian Dynamic Term Structure Models 2005Issue costs in the Eurobond market: The effects of market integration 2008Reassessing co-movements among G7 equity markets: evidence from iShares 2010Dynamics of Equity Market Integration in Europe: Impact of Political Economy Events

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.