The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: Jul, 1994, Volume 62, Issue 4
https://doi.org/0012-9682(199407)62:4<901:VALBNS>2.0.CO;2-7
p. 901-933
Enrique Sentana, Mervyn King, Sushil Wadhwani
The empirical objective of this study is to account for the time-variation in the covariances between stock markets, and to assess the extent of capital market integration. Using data on sixteen national stock markets, we estimate a multivariate factor model in which the volatility of returns is induced by changing volatility in the factors. Unanticipated returns are assumed to depend both on innovations in "observable" economic variables and on "unobservable" factors. The risk premium on an asset is a linear combination of the risk premia associated with factors. We find that idiosyncratic risk is significantly priced, and that the "price of risk" is not common across countries. This either can be interpreted as evidence against the null of integrated capital markets or could reflect the failure of some other maintained assumptions. Another empirical finding is that only a small proportion of the covariances between national stock markets and their time-variation can be accounted for by "observable" economic variables. Changes in correlations between markets are driven primarily by movements in "unobservable" variables.
March 5, 2024
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.
