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Munich Personal RePEc Archive

International portfolio diversification: An

ICAPM approach with currency risk

Dimitriou, Dimitrios and Simos, Theodore

Department of Economics, University of Ioannina, University

Campus, 45110 Ioannina, Greece, Department of Economics,

University of Ioannina, University Campus, 45110 Ioannina, Greece

8 November 2012

Online at

https://mpra.ub.uni-muenchen.de/42825/

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Τime varying 5M 00 5M 00> 5M 00> 5M1 1 5M1 1 5M1 5 5M1 5 5M1 0

price of risk (Panel A)

Φw (World risk) ( '! ( '! ( '! ( '!

! TTT ! !9 5TTT ! 1!90TTT ! !1 T ! 09

+#( 1C1! 0 ! CC!>> !95 9! TTT ! 1!05 !05C

+ ( 1>!55TT ! 9> >!0 TTT ! ! TTT ! 1 ! TTT ! ;42G 0!10TTT ! 5 ! >TTT ! >9! TTT ! 99! TTT !

Φc (Currency risk) ( '! ( '! ( '! ( '!

!>5T ! C 1 !1 T ! 0C !5 TTT ! >!1 ! 0 +#( 1 0 !> TT ! > !>9 !09C C 9!55 !9C 0>5! ! 10 + ( 199!1 ! 9 0 ! >TT ! 90 95!0 TTT ! 9 0! 1TTT ! ;42G 910!0 TTT ! 11C5! 9TTT ! 1C9!50 !910 1 ! 1TTT !

(Panel B)

γι (Domestic risk) ( '! ( '! ( '! ( '!

Developed markets

/ 9!95 !11> ! ! 00 ! !9 > !C9 !11

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. 9! 1TTT ! ! !1>0 ! 1 ! 51 !19 ! 55

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Emerging markets

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(12)

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Diagnostic Tests (Total period) Engle and Ng Test (Panel C)

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Cond/nal. Variance Process Eq: (10)

(Panel D)

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