Publication
The Korean Journal of Economic Studies
Risk Adjusted Rate and Interest Parity
Heeho Kim / Taehun JungYear 2009Vol. 57No. 1
Abstract
This paper purposes to empirically examine whether UIP holds, using “riskadjusted rate of return” for international portfolio flows. This study alsoexamines the coefficient of risk factor between countries in estimating theadjusted UIP model. Using the monthly data of the developed and Asianemerging markets during 1994.1-2008.7, evidence strongly supports ourresearch hypothesis. When using the risk adjusted rate of return, the UIPholds between the emerging and the developed markets, while the UIP doesnot hold between the developed markets. Risk factors are statisticallysignificant and different, which are positive between the developed markets,and are negative between the emerging and the developed markets.