Inflation Risk, Exchange Rate Risk and Asset Returns: Evidence from Korea, Malaysia and Taiwan

17 Pages Posted: 23 Aug 2010

See all articles by Kashif Saleem

Kashif Saleem

Lappeenranta University of Technology - School of Business (LSB)

Date Written: August 23, 2010

Abstract

In this paper we investigate whether inflation and currency risks are priced in the Korean, Malaysian and Taiwan stock market using conditional international asset pricing models. We take the view of a US investor. The estimation is conducted using a modified version of the multivariate GARCH framework of De Santis and Gérard (1998). We use a sample period from 1988 to 2009. The results show that the world market risk is priced on Korean, Malaysian, Taiwan and US stock markets. We find the currency and inflation risk to be also priced on Korean, Malaysian and Taiwan market.

Keywords: foreign exchange risk, inflation risk, ICAPM, emerging markets, multivariate GARCH

JEL Classification: G12, G15

Suggested Citation

Saleem, Kashif, Inflation Risk, Exchange Rate Risk and Asset Returns: Evidence from Korea, Malaysia and Taiwan (August 23, 2010). Available at SSRN: https://ssrn.com/abstract=1663426 or http://dx.doi.org/10.2139/ssrn.1663426

Kashif Saleem (Contact Author)

Lappeenranta University of Technology - School of Business (LSB) ( email )

Department of Finance
PO Box 20
Lappeenranta, 53851
Finland
+358 5 621 7284 (Phone)

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