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Author: Michael Donadelli
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
The average equity risk premium (ERP) in emerging markets is well-known to be significantly higher than in developed markets. But, key reasons for this remain unclear, contributing to investment strategy uncertainty. Here, we use industry-level data for 19 emerging market countries across three regions of the world to first examine the contribution of each industrial stock market to the extra premium paid by emerging markets to international investors from 1995 to present, and then to explore the relative importance of country-level governance and macroeconomic policy uncertainty in explaining both national and regional industry-by-industry ERP behaviour. We conduct separate analyses for the emerging mar- ket crises period of 1995-2002, and the post-crises period of 2003-2012. Based on both static and dynamic approaches, we find that some industries indeed perform consistently better than others. In particular: (i) the healthcare and basic materials industries mostly contributed to the extra premium paid by the Asian stock market; and (ii) the East European and Latin American stock markets' extra performances were largely driven by the utilities and consumer services industries, respectively. However, our cross-sectional analyses sug- gest that country-level governance indicators are not strongly correlated with either national or industry-level returns, with the exception of the consumer services industry. Lastly, using both rolling-window and DCC-GARCH frameworks, we find that correlations between industrial stock market excess returns and a measure of global economic policy uncertainty are consistently negative, and follow similar patterns. Our empirical evidence as a whole suggests that industrial stock markets are more highly related both within and across countries and regions than has been suggested previously. Contrary to much existing empirical work, our results therefore suggest there is little space in emerging markets to exploit cross- industry portfolio diversification benefits.
Author: Michael Donadelli
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
The average equity risk premium (ERP) in emerging markets is well-known to be significantly higher than in developed markets. But, key reasons for this remain unclear, contributing to investment strategy uncertainty. Here, we use industry-level data for 19 emerging market countries across three regions of the world to first examine the contribution of each industrial stock market to the extra premium paid by emerging markets to international investors from 1995 to present, and then to explore the relative importance of country-level governance and macroeconomic policy uncertainty in explaining both national and regional industry-by-industry ERP behaviour. We conduct separate analyses for the emerging mar- ket crises period of 1995-2002, and the post-crises period of 2003-2012. Based on both static and dynamic approaches, we find that some industries indeed perform consistently better than others. In particular: (i) the healthcare and basic materials industries mostly contributed to the extra premium paid by the Asian stock market; and (ii) the East European and Latin American stock markets' extra performances were largely driven by the utilities and consumer services industries, respectively. However, our cross-sectional analyses sug- gest that country-level governance indicators are not strongly correlated with either national or industry-level returns, with the exception of the consumer services industry. Lastly, using both rolling-window and DCC-GARCH frameworks, we find that correlations between industrial stock market excess returns and a measure of global economic policy uncertainty are consistently negative, and follow similar patterns. Our empirical evidence as a whole suggests that industrial stock markets are more highly related both within and across countries and regions than has been suggested previously. Contrary to much existing empirical work, our results therefore suggest there is little space in emerging markets to exploit cross- industry portfolio diversification benefits.
Author: William N. Goetzmann
Publisher: Oxford University Press
ISBN: 019803377X
Category : Business & Economics
Languages : en
Pages : 568
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Book Description
What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing. This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.
Author: Michael Donadelli
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
The understanding of the Equity Risk Premium (ERP) and the Equity Premium Puzzle (Mehra and Prescott 1985), is still widely discussed in the economic and financial literature. The purpose of this paper is to show differences in the ERP between developed and emerging markets. Using data from both markets, we first provide an ex-post simple time series analysis on the ERP. Compared to developed markets, and in line with existing literature, we find that emerging markets compensate investors with higher returns. We observe that the time varying nature of the equity risk premium in emerging economies, relates mainly to economic cycles, shocks and other macro phenomena (i.e. global financial market integration). Basic statistics also show that during the last decade the ERP shrunk, especially in advanced economies. To improve investigations on the higher emerging markets' equity premium, a standard global asset pricing model is adopted. On one hand, we mainly find that the one-factor model does not fully characterize emerging markets' equity premia. On the other hand, we discover that the inclusion of liquidity conditions and time-varying components provides reasonable explanations for the behaviour of equity premia in these "young" markets. Our final findings mainly suggests that global business cycle and financial integration process are crucial in determining the risk associated to emerging markets' investments.
Author: Bradford Cornell
Publisher: John Wiley & Sons
ISBN: 9780471327356
Category : Business & Economics
Languages : en
Pages : 248
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Book Description
Das Thema Risikoprämie für Aktien (Equity Risk Premium) wird hier zum ersten Mal verständlich erklärt. Die Risikoprämie für Aktien stellt einen Renditeausgleich dar für das erhöhte Risiko, das ein Anleger bei der Investition in Aktien eingeht, im Vergleich zu einer Investition in risikofreie Staatsanleihen. Die Risikoprämie ist zwar von der Theorie her einfach, jedoch in der Praxis ein sehr komplexes Phänomen. Für Finanzentscheidungen ist es von größter Bedeutung, daß man das Prinzip der Risikoprämie versteht und es anwenden kann. Cornell erläutert das Thema Schritt für Schritt sehr anschaulich und ohne terminologischen Ballast. Zunächst wird die Risikoprämie im Zusammenhang mit der Geschichte des Aktienmarktes betrachtet. Der Haussemarkt der 90er dient dabei als Fallstudie. Cornell zeigt, welche Rückschlüsse man durch die Analyse der Risikoprämie im historischen Verlauf für den Aktienmarkt ziehen kann, z.B. ob Aktienkurse steigen oder fallen oder ob sich der Aktienmarkt verändert. Vorausschauende Schätzungen der Risikoprämie werden anhand verschiedener konkurrierender Modelle analysiert, wobei die Vorzüge der jeweiligen Methode mitbewertet werden. 'Equity Risk Premium' ist das erste Buch, das dieses wichtige Prinzip der Risiko-Nutzen-Analyse erschöpfend behandelt. Es vermittelt einen tiefen Einblick und deckt alle Grundlagen ab, damit Investoren fundierte Finanzentscheidungen treffen können. Ein absolutes Muß für institutionelle Anleger, Geldmanager und Finanzvorstände, die auf eine fundierte Marktanalyse zurückgreifen müssen. (06/99)
Author: Ahmad Rizal Mazlan
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 226
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Book Description
The flow of foreign portfolio investment in emerging markets is growing but is lower than market capitalization growth due to the relatively higher investment risk inherent in those markets. This is exacerbated by the fact that most emerging markets have been adversely affected, albeit with varying degree, by financial crises. As a central component in the risk and return concept, research in equity risk premium (ERP) is imperative, particularly if financial crisis dimension is coalesced into the study. Hence, this study is conducted to examine the characteristics and determinants of the equity risk premium in the emerging markets inflicted by various financial crises. In the first part, panel regressions are utilized to examine the determinants of ERP, while in the second part, event study methodology is used to investigate the immediate impact that financial crises had on the levels of ERP in the emerging markets. The findings in the overall panel regression are different from the findings in the group regressions that take into account the various crises and different time periods. Although GDP per capita growth rate and inflation rate are consistently positively significant in the overall regressions, the results do not persist in the crises-grouped regressions. These findings extend the current literature on the determinants of ERP as well as the characteristics of emerging market crises. In the event study analysis, the mixed results indicate that each emerging market is uniquely different in terms of how the ERP was affected at the onset of the crises. Furthermore, the grouped cumulative abnormal equity risk premium (CAERP) findings indicate that the crises also are distinctly different from each other. The Tequila crisis is the worst hit crisis, followed by the Russian crisis and the Asian crisis, as far as the CAERP findings are concerned. Furthermore, there are also differences in the results calculated using estimates from different regressions, namely, the OLS, ARCH and GMM regressions. Thus, the findings of this study have contributed to the current literature, as well as having practical implications to the practitioners such as fund managers and corporate managers who rely heavily on the equity risk premium as a key input in their decision-making processes.
Author: McKinsey & Company Inc.
Publisher: John Wiley & Sons
ISBN: 0470889934
Category : Business & Economics
Languages : en
Pages : 860
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Book Description
The number one guide to corporate valuation is back and better than ever Thoroughly revised and expanded to reflect business conditions in today's volatile global economy, Valuation, Fifth Edition continues the tradition of its bestselling predecessors by providing up-to-date insights and practical advice on how to create, manage, and measure the value of an organization. Along with all new case studies that illustrate how valuation techniques and principles are applied in real-world situations, this comprehensive guide has been updated to reflect new developments in corporate finance, changes in accounting rules, and an enhanced global perspective. Valuation, Fifth Edition is filled with expert guidance that managers at all levels, investors, and students can use to enhance their understanding of this important discipline. Contains strategies for multi-business valuation and valuation for corporate restructuring, mergers, and acquisitions Addresses how you can interpret the results of a valuation in light of a company's competitive situation Also available: a book plus CD-ROM package (978-0-470-42469-8) as well as a stand-alone CD-ROM (978-0-470-42457-7) containing an interactive valuation DCF model Valuation, Fifth Edition stands alone in this field with its reputation of quality and consistency. If you want to hone your valuation skills today and improve them for years to come, look no further than this book.
Author: Yi Zhang
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 96
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Book Description
Author: Stephen D. Hassett
Publisher: John Wiley & Sons
ISBN: 1118118618
Category : Business & Economics
Languages : en
Pages : 210
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Book Description
A radical, definitive explanation of the link between loss aversion theory, the equity risk premium and stock price, and how to profit from it The Risk Premium Factor presents and proves a radical new theory that explains the stock market, offering a quantitative explanation for all the booms, busts, bubbles, and multiple expansions and contractions of the market we have experienced over the past half-century. Written by Stephen D. Hassett, a corporate development executive, author and specialist in value management, mergers and acquisitions, new venture strategy, development, and execution for high technology, SaaS, web, and mobile businesses, the book convincingly demonstrates that the equity risk premium is proportional to long-term Treasury yields, establishing a connection to loss aversion theory. Explains stock prices from 1960 through the present including the 2008/09 "market meltdown" Shows how the S&P 500 has consistently reverted to values predicted by the model Solves the equity premium puzzle by showing that it is consistent with findings on loss aversion Demonstrates that three factors drive valuation and stock price: earnings, long term growth, and interest rates Understanding the stock market is simple. By grasping the simplicity, business leaders, corporate decision makers, private equity, venture capital, professional, and individual investors will fully understand the system under which they operate, and find themselves empowered to make better decisions managing their businesses and investment portfolios.
Author: Ahmad Rizal Mazlan
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Ahmad Rizal Mazlan
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
