Regime Dependent Sensitivity of International Markets to Common Risk Factors

• 作 者: JunYuan[1]LeonardMacLean[2]KuanXu[3]YongganZhao[2]
• 机 构: Department of Economics and School of Business Administration Dalhousie University Halifax,Nova Scot
• 出 处: 2014年中国工商管理研究前沿国际研讨会
• 发表日期: 2014年期

　　This paper examines the relationship of local country financial markets to risk factors which are global in their impact.Although international economies are closely linked,the reaction to changing conditions could differ across international markets.Furthermore the reaction could depend on the state of the global market,be it bear or bull.To answer these questions,a linear factor model is proposed with six global risk factors.The linear model depends on the state which is represented by economic regimes and the market switches between regimes according to a stationary Markov chain.Within this structure the Exchange Traded Funds (ETFs) for the U.S.,Canada,U.K.,Germany,France,Italy,Japan,and Australia from May 30,2000 to March 31,2011 are analyzed.The data support a 4 regime model.The empirical results show that both the returns of country ETFs and their sensitivities to the risk factors are highly regime and country dependent.