search query: @author Salemi, M.K. / total: 2
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| Author: | Kim, I. Salemi, M.K. |
| Title: | Estimation and simulation of risk premia in equity and foreign exchange markets |
| Journal: | Journal of International Money and Finance
2000 : AUG, VOL. 19:4, p. 561-582 |
| Index terms: | Finance Foreign exchange Optimization Risk premium Hedging Markets Models |
| Language: | eng |
| Abstract: | There is substantial evidence to reject constant-risk-premia financial models. This paper inquires whether mean-variance optimization models can do so. Asset risk is modeled with an absolute-error version of the ARCH-in-mean hypothesis and model hedging motives that derive from variation in future real income and inflation to account for agent heterogeneity. Considered is a 3-country-and-2-asset world. This paper's model predicts values for 5 excess returns relative to the U.S. bill rate. Systems approach is used to estimate the model parameters and then simulate the estimated model to determine if it can account for the important time-series properties of risk premia. |
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