||Empirical Analysis on Exchange Risk Premiums and Equity Market Risks ─ Evidence from Asian Emerging Countries
||Graduate Institute of Finance & Banking
TSLS-GARCH (1,1)-X 模型
exchange risk premiums
equity market risk
TSLS-GARCH (1,1)-X model
本篇文章旨在探討外匯市場風險溢酬與兩國間的權益報酬之間的關聯性。以Chiang (1991)主張外匯市場的風險溢酬是與兩國間的股票市場之風險溢酬差異息息相關為架構，檢驗美國與印尼、韓國、馬來西亞、菲律賓、新加坡、台灣、泰國間的未拋補股價平價(Uncovered Equity Parity)條件是否成立，結果發現國際熱錢的效應，使得樣本新興國家的匯險溢酬與股市風險呈現正向關係。
我們主要利用OLS法、工具變數法及TSLS-GARCH (1,1)-X 三種方法來探討變數之間的關聯性。此外，為了更能準確的捕捉到外匯市場風險溢酬的特性，我們特別將兩國股市報酬與資本流量三個變數放入條件異質變異數方程式中，以檢驗因時而異的風險溢酬之存在性和波動特性，以及波動間之相關性等問題。實證結果發現此三個變數因子對條件變異數的確有各種顯著及不同的影響。
This paper investigates how the relative performance of the domestic and the foreign equity markets affect the excess returns of foreign exchange returns for seven Asian Emerging stock markets. In all cases, higher average returns appear to be associated with a higher level of volatility. Testing the relationship between exchange rate premiums and relative equity returns by using OLS method, we find that the exchange rates tend to appreciate when the corresponding equity markets rise, implying massive of international “hot money” has been flowing into these emerging capital market. Using instrumental variable method and TSLS-GARCH (1,1)-X model, the testing results show that the exchange rate premium are significantly correlated with economic fundamentals such as the relative equity premium between the domestic and foreign equity markets, and capital flows.
Table of Contents VI
Chapter 1 Introduction 1
1.1 Background 1
1.2 Motivation and Objectives 3
Chapter 2 Literature Review 5
2.1 Pricing the exchange risk 5
2.2 Relationship between exchange markets and equity markets 7
2.3 Exchange rate and capital flows 10
2.4 Equity returns and capital flows 11
Chapter 3 The data and basic statistics 12
3.1 Data sample 12
3.2 Basic statistics 15
Chapter 4 Methodology 17
4.1 Chiang (1991) model 17
4.2 Estimating and testing TSLS-GARCH (1,1)-X model 22
Chapter 5 Empirical Results 25
5.1 Correlation analysis in exchange rate returns and equity index changes 25
5.2 Evidence shoes how the equity index return affect the exchange rates 25
5.3 Regression results in utilizing instrumental variables 26
5.4 Foreign exchange risk premiums and equity market risks 28
Chapter 6 Conclusion 31
Table of Contents
Table 1 Summary statistics for monthly changes in exchange rates 39
Table 2 Summary statistics for monthly changes in equity returns 40
Table 3 Summary statistics for monthly changes in instrumental variables 41
Table 3 Summary statistics for monthly changes in instrumental variables (continued) 42
Table 4 Correlations matrix of monthly changes in equity return and exchange rate 43
Table 5 Regression of exchange rate return on foreign and the US market excess returns 44
Table 6 Regression of equity returns on instrumental variables 45
Table 7 Estimation results of TSLS-GARCH (1,1)-X model for relative equity risks- Stage one 46
Table 7 Estimation results of TSLS-GARCH (1,1)-X model for relative equity risks- Stage two 47
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