Research and publications
Forecasting changes in equity risk premia of international markets: An error correction approach
This paper uses an error correction model in order to predict the changes in equity risk premia for a set of emerging markets and the US market. It analyses the period 2001-2006 for different forecasting horizons and considers different sub-samples. Using fundamental financial ratios and including variables such as the implied volatility of the S&P 500 index, the paper finds some evidence of predictability of equity risk premia for these markets. Other preliminary results include the tests of stationarity for all the variables and evidence is found of cointegration among some of the variables.
Author(s):
Juliana Caicedo-Llano, Thomas Dionysopoulos
Summary:
This paper uses an error correction model in order to predict the changes in equity risk premia for a set of emerging markets and the US market. It analyses the period 2001-2006 for different forecasting horizons and considers different sub-samples. Using fundamental financial ratios and including variables such as the implied volatility of the S&P 500 index, the paper finds some evidence of predictability of equity risk premia for these markets. Other preliminary results include the tests of stationarity for all the variables and evidence is found of cointegration among some of the variables.
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Register/Log in| Type : | Working paper |
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| Date : | 05/04/2009 |
| Keywords : |
Risk |
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