Emerging Stock Premia: Some Evidence From Industrial Stock Market Data

Michael Donadelli and Marcella Lucchetta

Asian Economic and Financial Review, 2013, vol. 3, issue 4, 398-422

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.

Keywords: Emerging and developing economies; Industrial stock markets; Time-varying ERP (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
https://archive.aessweb.com/index.php/5002/article/view/1006/1489 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:asi:aeafrj:v:3:y:2013:i:4:p:398-422:id:1006

Access Statistics for this article

More articles in Asian Economic and Financial Review from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().