Conditional Asset Pricing in Emerging Stock Markets

Wolfgang Drobetz, Susanne Stürmer and Heinz Zimmermann

Swiss Journal of Economics and Statistics (SJES), 2002, vol. 138, issue IV, 507-526

Abstract: Stock returns in emerging markets are to some extent predictable on the basis of selected instrument variables. We show that local information is more important than global information to capture emerging stock market returns. This is an indication for at least partial segmentation of emerging stock markets. Our empirical results further demonstrate that predictability can be explained by time-variation in economic risk premiums. Instead of testing a traditional beta pricing model, we test a fully conditional asset pricing model in a stochastic discount factor framework. Scaling the vector of returns incorporates conditioning information, and scaling the economic risk factors captures time-variation in risk premiums. This technique allows testing some conditional implications of stochastic discount factor models, estimating the fixed weights of scaled factors as if the model was unconditional.

Keywords: Asset pricing; stochastic discount factor; time-varying risk premium; emerging markets; predictability (search for similar items in EconPapers)
JEL-codes: E21 G12 G14 G15 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sjes.ch/papers/2002-IV-11.pdf (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:ses:arsjes:2002-iv-11

Access Statistics for this article

Swiss Journal of Economics and Statistics (SJES) is currently edited by Marius Brülhart

More articles in Swiss Journal of Economics and Statistics (SJES) from Swiss Society of Economics and Statistics (SSES) Contact information at EDIRC.
Bibliographic data for series maintained by Kurt Schmidheiny ().