Abstract
ABSTRACT This article finds novel evidence on the uncovered equity parity (UEP) condition by employing copula methodology with historical datasets spanning back to 1870. First, across 17 advanced countries over the twentieth century, a higher equity return currency tends to depreciate in real terms at an annual frequency. Moreover, we also find a statistically significant positive tail dependence between the real equity returns differential and the real exchange rate differential. That is, when real currency returns and real equity returns take extreme values, they tend to co-move in the same direction, implying a time-varying UEP condition that is also confirmed by our time-varying Student-t copula estimation. Our novel findings call for richer theoretical explanations on the UEP relationship.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
