Economics at your fingertips  

Conditional pricing of currency risk in Africa's equity markets

Odongo Kodongo and Kalu Ojah ()

Emerging Markets Review, 2014, vol. 21, issue C, 133-155

Abstract: In this paper, we sought to establish whether Africa's volatile currencies drive equity risk premia. We use the SDF framework to estimate various conditional specifications of the International Capital Asset Pricing Model through generalized method of moments technique. Our results show strong evidence of conditional, time-varying currency risk premia in equity returns. Currency risk is also perceived by international investors as important in informing the equities pricing kernel. Interestingly, we find evidence that international investors are concerned about Africa's small size equity markets and build the impact of anticipated low trading into their pricing calculus.

Keywords: Africa; Currency risk; Equity markets; Stochastic discount factor; GMM (search for similar items in EconPapers)
JEL-codes: G12 G15 F21 F31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Conditional Pricing of Currency Risk in Africa's Equity Market (2018) Downloads
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:

DOI: 10.1016/j.ememar.2014.08.005

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

Page updated 2021-03-28
Handle: RePEc:eee:ememar:v:21:y:2014:i:c:p:133-155