Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62861
Authors: 
Cappiello, Lorenzo
Panigirtzoglou, Nikolaos
Year of Publication: 
2005
Series/Report no.: 
Working Paper, Department of Economics, Queen Mary, University of London 547
Abstract: 
The goal of this study is to measure market prices of risk and the associated foreign exchange risk premia extending the approach proposed by Balduzzi and Robotti (2001) to an international framework. Estimations of minimum variance stochastic discount factors permits the determination of market prices of risk, which, in turn, in an international framework, allow to compute foreign exchange risk premia. Market prices of risk are time-varying and surge during financial turmoil. This may be interpreted as an increase of the investors' coefficient of risk aversion during turbulent financial markets. Foreign exchange risk premia are also time-varying and they exhibit most variation from the early '70s onwards, when the Bretton Wood exchange rate system collapsed.
Subjects: 
Foreign exchange, Risk premia, Pricing kernel
JEL: 
G12
G15
F31
Document Type: 
Working Paper

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