Advanced Search
MyIDEAS: Login to save this article or follow this journal

Equity risk premium and regional integration

Contents:

Author Info

  • Arouri, Mohamed
  • Teulon, Frédéric
  • Rault, Christophe

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 another 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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S1057521913000185
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 28 (2013)
Issue (Month): C ()
Pages: 79-85

as in new window
Handle: RePEc:eee:finana:v:28:y:2013:i:c:p:79-85

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620166

Related research

Keywords: Asset pricing; Regional integration; Equity risk premium;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Robert C. Merton, 1980. "On Estimating the Expected Return on the Market: An Exploratory Investigation," NBER Working Papers 0444, National Bureau of Economic Research, Inc.
  2. De Santis, Giorgio & Gerard, Bruno, 1997. " International Asset Pricing and Portfolio Diversification with Time-Varying Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 52(5), pages 1881-1912, December.
  3. Gerard, Bruno & Thanyalakpark, Kessara & Batten, Jonathan A., 2003. "Are the East Asian markets integrated? Evidence from the ICAPM," Journal of Economics and Business, Elsevier, Elsevier, vol. 55(5-6), pages 585-607.
  4. Karolyi, G. Andrew & Stulz, Rene M., 2003. "Are financial assets priced locally or globally?," Handbook of the Economics of Finance, Elsevier, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 16, pages 975-1020 Elsevier.
  5. Gupta, Rakesh & Guidi, Francesco, 2012. "Cointegration relationship and time varying co-movements among Indian and Asian developed stock markets," International Review of Financial Analysis, Elsevier, Elsevier, vol. 21(C), pages 10-22.
  6. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 19(3), pages 425-442, 09.
  7. Chelley-Steeley, Patricia, 2004. "Equity market integration in the Asia-Pacific region: A smooth transition analysis," International Review of Financial Analysis, Elsevier, Elsevier, vol. 13(5), pages 621-632.
  8. Hardouvelis, Gikas A & Malliaropoulos, Dimitrios & Priestley, Richard, 1999. "EMU and European Stock Market Integration," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2124, C.E.P.R. Discussion Papers.
  9. Carrieri, Francesca & Errunza, Vihang & Hogan, Ked, 2007. "Characterizing World Market Integration through Time," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 42(04), pages 915-940, December.
  10. Solnik, Bruno, 1983. " International Arbitrage Pricing Theory," Journal of Finance, American Finance Association, American Finance Association, vol. 38(2), pages 449-57, May.
  11. Errunza, Vihang & Losq, Etienne, 1985. " International Asset Pricing under Mild Segmentation: Theory and Test," Journal of Finance, American Finance Association, American Finance Association, vol. 40(1), pages 105-24, March.
  12. El Hedi Arouri, Mohamed & Huong Dinh, Thanh & Khuong Nguyen, Duc, 2010. "Time-varying predictability in crude-oil markets: the case of GCC countries," Energy Policy, Elsevier, vol. 38(8), pages 4371-4380, August.
  13. Arouri, Mohamed El Hedi & Nguyen, Duc Khuong & Pukthuanthong, Kuntara, 2012. "An international CAPM for partially integrated markets: Theory and empirical evidence," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(9), pages 2473-2493.
  14. Afonso, António & Rault, Christophe, 2008. "Budgetary and external imbalances relationship: a panel data diagnostic," Working Paper Series, European Central Bank 0961, European Central Bank.
  15. Kearney, Colm & Lucey, Brian M., 2004. "International equity market integration: Theory, evidence and implications," International Review of Financial Analysis, Elsevier, Elsevier, vol. 13(5), pages 571-583.
  16. Black, Fischer, 1974. "International capital market equilibrium with investment barriers," Journal of Financial Economics, Elsevier, Elsevier, vol. 1(4), pages 337-352, December.
  17. Geert Bekaert & Campbell R. Harvey & Robin L. Lumsdaine, 1999. "The Dynamics of Emerging Market Equity Flows," NBER Working Papers 7219, National Bureau of Economic Research, Inc.
  18. Imed Drine & Christophe Rault, 2006. "Testing for inflation convergence between the Euro Zone and its CEE partners," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(4), pages 235-240.
  19. Parent, Antoine & Rault, Christophe, 2004. "The Influences Affecting French Assets Abroad Prior to 1914," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 64(02), pages 328-362, June.
  20. Geert Bekaert & Campbell R. Harvey, 2003. "Market Integration and Contagion," NBER Working Papers 9510, National Bureau of Economic Research, Inc.
  21. Bekaert, Geert & Harvey, Campbell R., 2003. "Emerging markets finance," Journal of Empirical Finance, Elsevier, Elsevier, vol. 10(1-2), pages 3-56, February.
  22. Voronkova, Svitlana, 2004. "Equity market integration in Central European emerging markets: A cointegration analysis with shifting regimes," International Review of Financial Analysis, Elsevier, Elsevier, vol. 13(5), pages 633-647.
  23. Brian M Lucey & Cal Muckley, 2011. "Robust Global Stock Market Interdependencies," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp353, IIIS.
  24. Imed Drine & Christophe Rault, 2005. "Can the Balassa-Samuelson theory explain long-run real exchange rate movements in OECD countries?," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(8), pages 519-530.
  25. Harvey, Campbell R, 1991. " The World Price of Covariance Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 46(1), pages 111-57, March.
  26. Aggarwal, Raj & Kyaw, NyoNyo A., 2005. "Equity market integration in the NAFTA region: Evidence from unit root and cointegration tests," International Review of Financial Analysis, Elsevier, Elsevier, vol. 14(4), pages 393-406.
  27. Mohamed El Hedi Arouri & Duc Khuong Nguyen, 2010. "Time-varying characteristics of cross-market linkages with empirical application to Gulf stock markets," Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 36(1), pages 57-70, January.
  28. Yannick L'horty & Christophe Rault, 2004. "Inflation, minimum wage and other wages: an econometric study on French macroeconomic data," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(4), pages 277-290.
  29. Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc.
  30. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, Elsevier, vol. 13(3), pages 341-360, December.
  31. Barari, Mahua, 2004. "Equity market integration in Latin America: A time-varying integration score analysis," International Review of Financial Analysis, Elsevier, Elsevier, vol. 13(5), pages 649-668.
  32. Adler, Michael & Qi, Rong, 2003. "Mexico's integration into the North American capital market," Emerging Markets Review, Elsevier, Elsevier, vol. 4(2), pages 91-120, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Lau, Chi Keung Marco & Demir, Ender & Bilgin, Mehmet Huseyin, 2013. "Experience-based corporate corruption and stock market volatility: Evidence from emerging markets," Emerging Markets Review, Elsevier, Elsevier, vol. 17(C), pages 1-13.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:28:y:2013:i:c:p:79-85. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.