Global financial markets and the risk premium on U . S . equity *

@inproceedings{Chan2001GlobalFM,
  title={Global financial markets and the risk premium on U . S . equity *},
  author={K. Caleb Chan and G. Andrew Karolyi and Renl M. Stulz},
  year={2001}
}
There is a significant foreign influence on the risk premium for US. assets. Using a bivariate GARCH-in-mean process. we find that the conditional expected excess return on U.S. stocks is positively related to the conditional covariance of the return of these stocks with the return on a foreign index but is not related to its own conditional variance. Further, we are unable to reject the international version of the CAPM. We present evidence for different model specifications. multipleday… CONTINUE READING
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