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LIQUIDITY RISK AND TIME-VARYING CORRELATION BETWEEN EQUITY AND CURRENCY RETURNS

Title
LIQUIDITY RISK AND TIME-VARYING CORRELATION BETWEEN EQUITY AND CURRENCY RETURNS
Author
정국모
Keywords
EXCHANGE-RATES; LONG-RUN; ASSET PRICES; EXPLANATION; PUZZLES; PREMIUM; MODELS; FLOWS
Issue Date
2017-04
Publisher
WILEY
Citation
ECONOMIC INQUIRY, v. 55, no. 2, page. 898-919
Abstract
Using the data of 20 major Organization for Economic Co-operation and Development countries over time, this article documents new evidence on real equity and real currency prices: higher real returns in the home equity market relative to its foreign counterparts are generally associated with real home currency depreciation at monthly frequency, but this negative correlation breaks down or even reverses during times of relatively higher aggregate economic uncertainty or volatility. This article also argues that a long-run risks-type model with time-varying liquidity risk in stock markets can provide one plausible explanation for the time-varying correlation structure. (JEL E43, F31, G12, G15)
URI
https://onlinelibrary.wiley.com/doi/abs/10.1111/ecin.12418http://repository.hanyang.ac.kr/handle/20.500.11754/113861
ISSN
0095-2583; 1465-7295
DOI
10.1111/ecin.12418
Appears in Collections:
COLLEGE OF INTERNATIONAL STUDIES[S](국제학부) > INTERNATIONAL STUDIES(국제학부) > Articles
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