The price of inflation and foreign exchange risk in international equity markets

Arbeitspapier

In this paper the author formulates and tests an international intertemporal capital asset pricing model in the presence of deviations from purchasing power parity (II-CAPM [PPP]). He finds evidence in favor of at least mild segmentation of international equity markets in which only global market risk appears to be priced. When using the Hansen & Jagannathan (1991, 1997) variance bounds and distance measures as testing devices, the author finds that, while all international asset pricing models are formally rejected by the data, their pricing implications are substantially different. The superior performance of the II-CAPM (PPP) is mainly attributable to significant hedging against inflation risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2001-26

Classification and Topics

• Classification: Wirtschaft
• Subject: Hedging (Finance) ; Asset pricing ; Foreign exchange ; Risk

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Robotti, Cesare
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/100831
• Last update: 10.03.2025, 11:41 AM CET