Integration, diversification, and spillover : an assessment of the emerging markets using American Depository Receipts (ADRs)

The focus of this thesis is on the emerging markets. It assesses intra- and inter-market mean and volatility spillover, investigates the impact of the Mexican currency crisis on international portfolio diversification, and employ international asset pricing to test the integration of the emerging markets

Return-volatility linkages in the international equity and currency markets

This paper, which is motivated by the literature on international asset pricing and recent work on exchange rate determination, investigates dynamic relationshiops between major currency and equity markets. Using a multivariate GARCH framework, we examine conditional cross-autocorrelations between pairs of national equity markets and related exchange rates. This provides a parsimonious way of testing mean-volatility relationships in currency and equity markets and re-examining the robustness of relationships between equity markets, while controlling for exchange rate effects. We find that the relationship between currency and equity markets is bi-directional, significant, persistent, and independent of the relationship strictly between equity markets, and that it is better captured by the conditional second moments.international asset pricing; exchange rate determination; equity markets; relationships between currency and equity markets

Return-volatility linkages in the international equity and currency markets

This paper, which is motivated by the literature on international asset pricing and recent work on exchange rate determination, investigates dynamic relationshiops between major currency and equity markets. Using a multivariate GARCH framework, we examine conditional cross- autocorrelations between pairs of national equity markets and related exchange rates. This provides a parsimonious way of testing mean- volatility relationships in currency and equity markets and re-examining the robustness of relationships between equity markets, while controlling for exchange rate effects. We find that the relationship between currency and equity markets is bi-directional, significant, persistent, and independent of the relationship strictly between equity markets, and that it is better captured by the conditional second momentsinternational asset pricing, exchange rate determination, equity markets, relationships between currency and equity markets

Does hedging tell the full story? Reconciling differences in US aggregate and industry-level exchange rate risk premia

While the importance of currency movements to industry competitiveness is theoretically well established, there is little evidence that currency risk impacts US industries. Applying a conditional asset-pricing model to 36 US industries, we find that all industries have a significant currency premium that adds about 2.47 percentage points to the cost of equity and accounts for approximately 11.7% of the absolute value of total risk premia. Cross-industry variation in the currency premium is explained by foreign income, industry competitiveness, leverage, liquidity and other industry characteristics, while its time variation is explained by US aggregate foreign trade, monetary policy, growth opportunities and other macro variables. The results indicate that methodological weakness, not hedging, explains the insignificant industry currency risk premium found in previous work, thus resolving the conundrum that the currency risk premium is important at the aggregate stock market level, but not at industry level.exposure; currency risk premium; cost of equity; industry competition; international asset pricing

WHAT DRIVES TIME VARIATION IN EMERGING MARKET SEGMENTATION?

I use American Depositary Receipts and underlying stocks to test the level of integration of the stock markets of Argentina, Chile, and Mexico into the world capital market in the post-liberalization period. I find that these markets experience time-varying integration and are, on average, still not highly internationally integrated. Furthermore, there is no distinct trend toward higher levels of integration. In fact, the markets of Argentina and Mexico have become increasingly segmented over the post-liberalization period. I find that financial and economic openness, stock market liquidity and volatility, and the state of the currency market significantly affect the level of segmentation. 2005 The Southern Finance Association and the Southwestern Finance Association.

Product Market Competition, Capital Constraints and Firm Growth Product Market Competition, Capital Constraints and Firm Growth ‡ Product Market Competition, Capital Constraints and Firm Growth

Abstract We examine the impact of product market competition on quantity-of-capital constraints in 58 countries. Prior work shows that competition increases the costs of debt and equity, which reduce the economic profit from investment. Capital constraints, however, may prevent firms from exploiting all positive NPV projects. Using econometric techniques and unique survey data, we avoid potential endogeneity problems common to the study of both capital constraints and product market competition. We show that product market competition increases capital constraints. Auxiliary analyses suggest that asymmetric information is one mechanism driving this linkage. We also show that quantity-of-capital constraints negatively impact firm growth