Risk Premia in International Equity Markets Revisited

Abstract

Recent evidence suggests that global equity markets are becoming more risky. We find that much of the apparent increase in international variance and covariance of returns can be attributed to systematic variations in global risk premia correlated across markets, rather than to any fundamental change in the risk attributes of these markets. This result has interest both for practitioners and for those interested in modeling global asset prices.

Keywords: Risk premia, international asset pricing models, global capital markets, global investments

JEL Classification: G12, G15