The Determinants of Israel’s Cost of Capital: Globalization, Reforms and Politics

Asher Blass (), Osnat Peled () and Yishay Yafeh ()
Additional contact information
Osnat Peled: Bank of Israel
Yishay Yafeh: The Hebrew University of Jerusalem

No 2002.03, Bank of Israel Working Papers from Bank of Israel

Abstract: We examine fluctuations in the risk premium on Israeli sovereign debt traded in the US between 1996 and 1999. We find that, during this period, Israelís risk premium was predominantly affected by global events, most notably the crises in Asia and Russia. Domestic and regional events (e.g. the peace process, political changes, terrorist attacks, and economic reforms) had a miniscule immediate impact on the risk premium. By contrast, in the year 2000, Israeli bond prices were more affected by Israel specific events, perhaps as a result of dramatic events in that year, or due to the absence of major global emerging market crises. We also examine abnormal stock returns of Israeli companies traded in the US and find that, in contrast with Israelís sovereign debt, some domestic political events appear to have had an impact on their cost of capital even prior to 2000. Much like Israelís sovereign bonds, Israeli stock prices were far more sensitive to domestic events in 2000 than they had been in earlier years.

Pages: 42 pages
Date: 2002-05
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2002.03.pdf First version, 2002 (application/pdf)

Related works:
Journal Article: THE DETERMINANTS OF ISRAEL’S COST OF CAPITAL: GLOBALIZATION, REFORMS AND POLITICS (2004)
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:boi:wpaper:2002.03

Access Statistics for this paper

More papers in Bank of Israel Working Papers from Bank of Israel Contact information at EDIRC.
Bibliographic data for series maintained by Yossi Yakhin ().