Does Default Probability Matter in Latin American Emerging Markets?
Isabel Abinzano (),
Luis Muga and
Emerging Markets Finance and Trade, 2013, vol. 49, issue 5, 63-81
We analyze the impact of default probability in four leading Latin American stock markets: Argentina, Brazil, Chile, and Mexico. We find no positive default-risk premium except in the case of Brazil, and in fact we find a negative risk premium for Argentina and Mexico. The latter effect tends to fade when the analysis accounts for size and book-to-market variables. Although we find no size effect in any of the markets considered, the book-to-market effect is very strong in all of them, and our results reveal a consistent relationship, analogous to that found in more developed markets, between default probability and the size and book-to-market variables.
Keywords: book to market; default probability; emerging markets; size (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:49:y:2013:i:5:p:63-81
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