Global risk aversion and emerging market return comovements

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2018

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Elsevier Science Sa

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Economics
(1997)
Founded in 1997, the Department of Economics is among the founding departments of our University. The Department offers two extensive undergraduate programs, either in English or in Turkish. Our undergraduate programs are catered to developing our students’ skills of analytical thinking, and to practical education. In this regard, the Social Sciences Research and Training Laboratory, founded under the guidance of our department, offers hands-on training to our own students, students and academicians from other universities, and public institutions. Our Department also offers a Graduate Degree Program in Applied Economy and a Doctorate Degree Program in Political Economy for graduates of undergraduate and graduate degree programs.

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Abstract

Utilizing the recently developed measure of global risk aversion by Xu (2017), we show that global risk aversion is a significant determinant of international equity correlations, consistently across all emerging markets examined. The positive effect of risk aversion on emerging market comovements is particularly strong for South Africa and Turkey and is consistent with contagion effects. The results underscore the importance of non-cash flow shocks in models of contagion and portfolio risk. (C) 2018 Elsevier B.V. All rights reserved.

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Demirer, Riza/0000-0002-1840-8085;
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Demirer, Riza ORCID logo

Keywords

Time-varying correlation, Risk aversion, International equity markets

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35

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Volume

173

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Start Page

118

End Page

121

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https://doi.org/10.1016/j.econlet.2018.09.027
 https://hdl.handle.net/20.500.14411/2804

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