Please use this identifier to cite or link to this item: http://hdl.handle.net/1959.14/102584
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- Title
- Uncovered share return parity for Australian shares
- Related
- Journal of law and financial management, Vol. 5, No. 1 (2006), p.40-42
- Related
- http://www.mgsm.edu.au/wps/wcm/connect/90e1ea8047a1556b97659f4b6779ce22/jlfm5-Jun06-TValentine.pdf?MOD=AJPERES
- Publisher
- Macquarie Graduate School of Management
- Date
- 2006
- Author/Creator
- Valentine, Tom
- Description
- Interest rate parity (both covered and uncovered) is a well-established relationship in international finance. This theory has led by analogy to the suggestion that an equivalent relationship would exist for share returns. This paper explores such a share return parity relationship for the Australian and US share markets. An initial estimation suggests that Australian share returns do not fully reflect movements in US share returns. There are a number of explanations for this result. First, since market participants must react to expected returns, the expectations generating mechanisms (including that for changes in exchange rates) used in Australia and the United States may differ. Secondly, Australian and US shares may not be perfect substitutes. In particular, they may be perceived to have different risk characteristics. When this possibility is taken into account, a good explanation is obtained. The results throw some light on the desirability of offshore investment for Australian investors. However, the problem of proxying for expectations remains.
- Description
- 3 page(s)
- Resource Type
- Journal Of Law And Financial Management Collection
- Resource Type
- journal article
- Organisation
- Macquarie University. Macquarie Graduate School of Management
- Identifier
- http://hdl.handle.net/1959.14/102584
- Identifier
- ISSN:1446-6899
- Identifier
- mq-20101202-101736
- Language
- eng
- Rights
- Publisher version archived with the permission of the publisher Macquarie Graduate School of Management, Macquarie University, NSW, Australia. This archived copy is available for individual, non-commercial use. Permission to use this version for other uses must be obtained from the publisher.
- Full Text
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