The price of freedom: A Fama–French freedom factor

Marshall L. Stocker

Emerging Markets Review, 2016, vol. 26, issue C, 1-19

Abstract: Economic institutions in-part explain cross-country variation in levels of investment and capital market characteristics. Here, country-level equity returns are related to cross-country differences in economic institutions as measured by an index of economic freedom. The ex-ante level and ex-post change in economic freedom are observed to be country-level equity return factors exhibiting Sharpe ratios greater than that of the value, momentum, and size factors, factors to which change in economic freedom has a low correlation. Fama–MacBeth regressions confirm the economic freedom factor. Finally, the excess return earned from investing in countries with low economic freedom is the price of freedom.

Keywords: Asset pricing; economic freedom; Equity factor; Institutions; Fama MacBeth (search for similar items in EconPapers)
JEL-codes: G1 H1 O2 P5 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566014116300048
Full text for ScienceDirect subscribers only

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:eee:ememar:v:26:y:2016:i:c:p:1-19

DOI: 10.1016/j.ememar.2016.02.004

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 Catherine Liu ().