EMERGING STOCK PREMIA: SOME EVIDENCE FROM INDUSTRIAL STOCK MARKET DATA
Journal Title: Asian Economic and Financial Review - Year 2013, Vol 3, Issue 4
Abstract
This paper studies the behavior of emerging stock excess returns in an industry-by-industry context. We examine stock market performance for 23 countries and ten industries over 17 years from 1995 to 2012 – a period that includes major changes in capital market regulations, the removal of trade barriers, the IT bubble, the 9/11 terrorist attacks, and the subprime mortgage crisis. In addition, we examine stock market co-movement and risk exposure for ten industries in eight emerging/developing stock markets. We obtain four key empirical findings. First, at industry level, we confirm that the equity risk premium in emerging markets is higher than in developed markets. We also confirm the time-varying nature of emerging stock market excess returns. Second, at country level, we identify those industries that mainly contribute to the presence of the emerging stock premia. Third, we show that some industries are more exposed to global risk factors than others. Fourth, given the increasing degree of co-movement between international stock markets, we observe that some cross-industry portfolio diversification benefits are still exploitable. Our analysis yields interesting implications for financial applications. In particular, we argue that the presence of a strong time-varying component in the “industry-betas” might have strong impact on the estimation of the cost of capital.
Authors and Affiliations
Michael Donadelli| Department of Economics and Finance, LUISS Guido Carli, Rome (Italy), Marcella Lucchetta| Department of Economics, Ca’Foscari University, Venice (Italy)
Keywords
Related Articles
- EP ID EP1900
- DOI -
- Views 435
- Downloads 28
SOCIAL NETWORKING A SOURCE FOR DEVELOPING ENTREPRENEURIAL INTENTIONS AMONG ENTREPRENEURS: A CASE OF MULTAN
The present research aims at measuring how social networking is a source of developing entrepreneurial intentions among entrepreneurs. The study was designed with the intent to find the components of social networking wh...
INCOME DIVERSIFICATION AND BANK RISK-RETURN TRADE-OFF: EVIDENCE FROM AN EMERGING ECONOMY
This study examines the impact of bank income source diversification on risk-return trade off, of commercial banks in an emerging economy. Considering eleven commercial banks for the period from 2002 to 2015, the paper e...
TRADE-GROWTH NEXUS IN DEVELOPING AND DEVELOPED COUNTRIES: AN APPLICATION OF EXTREME BOUNDS ANALYSIS
In this study, we investigated the relationship between foreign trade and economic growth in the developing and developed countries by using extreme bounds analysis approach. For this we used unbalanced panel data of 103...
PERCEIVED LOAN RISK AND EX POST DEFAULT OUTCOME: ARE THE BANKS’ LOAN SCREENING CRITERIA EFFICIENT?
Prospective borrowers from commercial banks are usually made to pass through stringent lending procedure. The screening procedure is intended to forestall likely default intents and reduce credit risks. Banks, through th...
DOWRY SYSTEM IN PAKISTAN
This research paper argues on the evil of dowry system and its impact on Pakistani civilization. The objectives of this research were to substantiate the effect, favoritism and involvement of people in Dowry system. This...