Panel data approach to identify factors correlated with equity market risk premiums in developed and emerging markets

Mohamed Ariff, Vijaya Marisetty

    Research output: Contribution to journalArticleResearchpeer-review

    4 Citations (Scopus)

    Abstract

    Traditional time series or cross-sectional regression procedures yield mixed evidence on maintained hypotheses about the determinants of international equity returns. This paper re-examines how three theory-suggested factors affect equity returns and how the test results may differ between developed and the Asian emerging markets. However, on pooling observations, our estimated coefficients are much more accurate, and yield theory-consistent results. Using the panel data method, we find that the equity returns, specified as risk premiums of developed and emerging markets, appear to be determined by variations within the equity markets using all three theory-suggested factors. In the emerging Asian markets, the risk premiums are affected more by the variation over time in income growth while the variations in the other two factors affect the equity premiums as within market variation effects.
    Original languageEnglish
    Pages (from-to)107 - 118
    Number of pages12
    JournalQuantitative Finance
    Volume12
    Issue number1
    DOIs
    Publication statusPublished - 2012

    Cite this