Forecasting changes in equity risk premia of international markets: An error correction approach

We use an error correction model in order to predict the changes in equity risk premia for a set of emerging markets and the US market.

Author(s):

Juliana Caicedo-Llano

Professor of Finance, ICMA Centre, University of Reading (UK)

Thomas Dionysopoulos

Research Associate, EDHEC Risk and Asset Management Research Centre

We analyze the period 2001-2006 for different forecasting horizons and consider different sub-samples. Using fundamental financial ratios and including variables such as the implied volatility of the S&P 500 index, we find some evidence of predictability of equity risk premia for these markets. Other preliminary results include the tests of stationarity for all the variables and we find evidence of cointegration among some of the variables.
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Forecasting changes in equity risk premia of international markets: An error cor...
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Type: Working paper
Date: le 04/05/2009
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [ joanne.finlay@edhec.edu ] Les opinions exprimées sont celles des auteurs et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

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