The Cost of Equity in Emerging Markets: A Downside Risk Approach (Ii)

15 Pages Posted: 9 Feb 2001

Date Written: January 2001

Abstract

Recent empirical evidence has established that a measure of downside risk, the semideviation with respect to the mean, explains the cross section of stock returns in emerging markets, and is a plausible variable to be used in a CAPM-type model to compute costs of equity. The evidence reported in this article indicates that the semideviation also explains the cross section of industry returns in emerging markets, thus adding to the robustness of this measure of downside risk. The evidence also shows that, unlike it is the case across emerging markets, across industries in emerging markets beta is correlated to mean returns.

Suggested Citation

Estrada, Javier, The Cost of Equity in Emerging Markets: A Downside Risk Approach (Ii) (January 2001). Available at SSRN: https://ssrn.com/abstract=249579 or http://dx.doi.org/10.2139/ssrn.249579

Javier Estrada (Contact Author)

IESE Business School ( email )

IESE Business School
Av. Pearson 21
Barcelona, 08034
Spain
+34 93 253 4200 (Phone)
+34 93 253 4343 (Fax)

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