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Exploring risk premium factors for country equity returns

Calice, Giovanni and Lin, Ming-Tsung (2021) 'Exploring risk premium factors for country equity returns.' Journal of Empirical Finance. ISSN 0927-5398

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Abstract

In this paper, we study a comprehensive set of risk premia of country equity returns for 45 countries over the sample period 2002 to 2018 in both a single and a multiple factor setting. Using a new three-pass estimation method for factor risk premia by Giglio and Xiu (2021), we find that several factors, including default risk, are also priced in country equity excess returns, controlled by the Fama–French 5-factor and Carhart model. Moreover, we apply a novel approach to investigate the multi-factor impact on country equity returns. We find that the multi-factor information, constructed from the first principal component of the statistically significant single factors, provides a consistent and stronger prediction of anomalies in country equity returns.

Item Type: Article
Uncontrolled Keywords: Country equity return, Country-based portfolio, Country risk premium, Country equity asset pricing model
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 19 Jul 2021 13:24
Last Modified: 19 Jul 2021 13:24
URI: http://repository.essex.ac.uk/id/eprint/30751

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