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The price of freedom: A Fama–French freedom factor

Listed author(s):
  • Stocker, Marshall L.
Registered author(s):

    Economic institutions in-part explain cross-country variation in levels of investment and capital market characteristics. Here, country-level equity returns are related to cross-country differences in economic institutions as measured by an index of economic freedom. The ex-ante level and ex-post change in economic freedom are observed to be country-level equity return factors exhibiting Sharpe ratios greater than that of the value, momentum, and size factors, factors to which change in economic freedom has a low correlation. Fama–MacBeth regressions confirm the economic freedom factor. Finally, the excess return earned from investing in countries with low economic freedom is the price of freedom.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1566014116300048
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    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 26 (2016)
    Issue (Month): C ()
    Pages: 1-19

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    Handle: RePEc:eee:ememar:v:26:y:2016:i:c:p:1-19
    DOI: 10.1016/j.ememar.2016.02.004
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620356

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