Global risk aversion and emerging market return comovements

Demirer R., Omay T., Yuksel A., Yüksel S. A.

Economics Letters, vol.173, pp.118-121, 2018 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 173
  • Publication Date: 2018
  • Doi Number: 10.1016/j.econlet.2018.09.027
  • Journal Name: Economics Letters
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.118-121
  • Keywords: Time-varying correlation, Risk aversion, International equity markets
  • TED University Affiliated: No

Abstract

Utilizing the recently developed measure of global risk aversion by Xu (2017), we show that global risk aversion is a significant determinant of international equity correlations, consistently across all emerging markets examined. The positive effect of risk aversion on emerging market comovements is particularly strong for South Africa and Turkey and is consistent with contagion effects. The results underscore the importance of non-cash flow shocks in models of contagion and portfolio risk.