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Equity Risk Premium and Regional Integration

Mohamed El Hedi Arouri (), Christophe Rault () and Frédéric Teulon
Additional contact information
Mohamed El Hedi Arouri: LEO - Laboratoire d'économie d'Orleans [2008-2011] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique
Christophe Rault: LEO - Laboratoire d'économie d'Orleans [2008-2011] - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique, EDHEC - EDHEC Business School - UCL - Université catholique de Lille

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Abstract: This article contributes to the literature on stock market integration by developing and estimating a capital asset pricing model with segmentation effects in order to assess stock market segmentation and its effects on risk premia at the regional level. We show that the estimated degrees of segmentation vary from one region to anther and over time. Moreover, we establish that compared to developed market regions, emerging market regions have four main dissimilarities: the total risk premiums are significantly higher, more volatile, dominated by regional residual risk factors and reflect mostly regional events. However, in the recent period emerging market regions have become less segmented as a result of liberalization and reforms and the relative magnitude of the premium associated with global factors has increased.

Date: 2013-03-07
New Economics Papers: this item is included in nep-fmk
Note: View the original document on HAL open archive server: https://hal.science/hal-00798052
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Related works:
Working Paper: Equity Risk Premium and Regional Integration (2014) Downloads
Journal Article: Equity risk premium and regional integration (2013) Downloads
Working Paper: Equity Risk Premium and Regional Integration (2013) Downloads
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