International Illiquidity

Aytek Malkhozov, Philippe Mueller, Andrea Vedolin, Gyuri Venter

Publikation: Working paperForskning

Abstrakt

We build a parsimonious international asset pricing model in which deviations of government bond yields from a fitted yield curve of a country measure the tightness of investors' capital constraints. We compute these measures at daily frequency for six major markets and use them to test the model-predicted effect of funding conditions on asset prices internationally. Global illiquidity lowers the slope and increases the intercept of the international security market line. Local illiquidity helps explain the variation in alphas, Sharpe ratios, and the performance of betting-against-beta (BAB) strategies across countries.
OriginalsprogEngelsk
UdgivelsesstedWashington D.C.
UdgiverBoard of Governors of the Federal Reserve System
Antal sider57
StatusUdgivet - mar. 2017
Navn International Finance Discussion Papers
Nummer1201

Emneord

  • Liquidity
  • Market frictions
  • Capital constraints
  • International CAPM

Citationsformater