Did the EMS Reduce the Cost of Capital?
构建动态APT多因子模型，研究1977-1997年十个欧洲国家的货币、债券和股票收益，发现汇率风险降低对资本成本有微小下降作用，并评估了股市一体化的潜在收益。
We propose a dynamic APT multi-factor model with time-varying volatility for currency, bond and stock returns for ten European countries over the period 1977-1997. We exploit the cross-sectional dimension of the model to construct world portfolios, which, when added to the original list of assets, allow us to develop simple consistent methods of estimation and testing. Our results reject the implicit asset pricing restrictions, and suggest that decreases in idiosyncratic exchange rate risk tend to lower the cost of capital, although the effect is small. Finally, we assess the potential gains from increased stock market integration.