Estimação do Equity Risk Premium

: o caso dos países emergentes e de fronteira

Abstract

This work is studies the problem of estimating the equity risk premium (ERP), with the primary aim of identifying and analyzing existing models to estimate the ERP in countries with high risk, as well as providing their estimation. To do this, data was collected from five emerging countries (South Africa, Brazil, China, Índia and Russia) and four frontier countries (Croatia, Morocco, Nigéria and Kenya) for the period between 2002 and 2013. This allowed to analyze a sample of 923 and 178 non-financial companies belonging to emerging and frontier countries, respectively. Based on the Expected Equity Premium concept defined by Fernandez (2013), this paper uses panel data regression models (Pooled OLS and Fixed Effect Models) as Aggarwal and Goodell (2008). From Hausman test we found that while there are individual characteristics that influence the regressors of the model for frontier countries, that is not the case for emerging countries. Our findings show a positive relationship between ERP and the valuation ratios. Regarding macroeconomic variables, there is a positive relationship between ERP and the inflation rate, the term spread, the volatility of exchange rates and the consumption growth rate. On the contrary, a negative relationship between the GDP growth rate and the ERP is found. Looking to the country risk, a negative relationship between the ERP and the risk of default is found. Finally, there is no evidence of a significant impact of the book to market ratio on ERP in any of the estimated models.

Date of Award	12 Dec 2016
Original language	Portuguese
Awarding Institution	Universidade Católica Portuguesa
Supervisor	João Pinto (Supervisor)