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Risk profiles: how do they change when stock markets collapse?

Authors
Journal
Journal of International Financial Markets Institutions and Money
1042-4431
Publisher
Elsevier
Publication Date
Volume
12
Issue
1
Identifiers
DOI: 10.1016/s1042-4431(01)00048-8
Keywords
  • Asset Pricing
  • Emerging Markets
  • Stock Market Crashes

Abstract

Abstract This paper has two main objectives: the first is to unveil the relative importance of global versus local risk factors in influencing excess returns in the emerging country stock markets; the second is to analyse how the observed risk profiles change when markets undergo a major crisis. Our main country of focus is Mexico, but we also analyse six Asian countries which went through the 1997 Asian crisis. Our findings indicate that during stable periods investors are mainly concerned about global risk factors, whereas close to a crisis they also include local factors in their information sets in forming expectations about future excess returns.

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