Events

Finance Seminar

Author:

• Rossen Valkanov
  UCSD

• Eric Ghysels
  UNC and CEPR

• Alberto Plazzi
  University of Lugano and SFI

We propose a quantile-based measure of conditional asymmetry. We find that the asymmetry of international stock market returns varies significantly across countries, over time, and persists at long horizons. The asymmetry of emerging stock returns is positive and does not co-move with that of developed markets. In an international portfolio setting, conditioning on return asymmetry leads to sizeable certainty equivalent gains relative to the value-weighted benchmark. It also increases the weight on emerging indices from 9% to between 25% and 40%. Investing in emerging markets seems to be about expectations of a higher upside than downside, consistent with recent theories.