Time-Varying Risk Premia in Large International Equity Markets

Ines Chaieb, Hugues Langlois and Olivier Scaillet
Additional contact information
Hugues Langlois: HEC Paris

No 18-04, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We use an estimation methodology tailored for large unbalanced panels of individual stock returns to address key economic questions about the factor structure, pricing performance of factor models, and time-variations in factor risk premia in international equity markets. We estimate factor models with time-varying factor exposures and risk premia at the individual stock level using 62,320 stocks in 46 countries over the 1985-2018 period. We consider market, size, value, momentum, profitability, and investment factors aggregated at the country, regional, and world level. We find that adding an excess country market factor to world or regional factors is sufficient to capture the factor structure for both developed and emerging markets. We do not reject asset pricing restriction tests for multifactor models in 74% to 91% of countries. Value and momentum premia show more variability over time and across countries than profitability and investment premia. The excess country market premium is statistically significant in many developed and emerging markets but economically larger in emerging markets.

Keywords: large panel; approximate factor model; risk premium; international asset pricing; market integration (search for similar items in EconPapers)
JEL-codes: C12 C13 C23 C51 C52 G12 G15 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2018-01, Revised 2018-06
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Time-Varying Risk Premia in Large International Equity Markets (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1804

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