Country and industry factors in tests of Capital Asset Pricing Models for partially integrated emerging markets

Ye Bai and Christopher J. Green

Economic Modelling, 2020, vol. 92, issue C, 180-194

Abstract: Existing literature has produced broadly inconclusive evidence about the asset pricing model which best fits partially integrated markets. This paper examines whether industry and country factors are independent factors helping to determine returns in emerging stock markets, or are derived from the stocks’ risk-return characteristics. We link the country-industry decomposition framework to the local and the Global CAPM in a new and more direct way. The results show that country factors are additional independent sources of cross-sectional variation in stock returns before 1996 particularly under the Global CAPM. After 1996, the results suggest partial integration: industry and country factors are both additional independent determinants of cross-sectional variations in stock returns. .

Keywords: Emerging equity markets; CAPM; Cross-sectional variation; Country factors; Industry factors (search for similar items in EconPapers)
JEL-codes: G15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:92:y:2020:i:c:p:180-194

DOI: 10.1016/j.econmod.2019.12.019

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