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Title: Information environment and equity risk premium volatility around the world
Authors: Lau, Sie Ting
Ng, Lilian
Zhang, Bohui
Issue Date: 2012
Source: Lau, S. T., Ng, L., & Zhang, B. (2012). Information Environment and Equity Risk Premium Volatility Around the World. Management Science, 58(7), 1322-1340.
Series/Report no.: Management science
Abstract: This paper examines whether and how differences in investors' information environments (measured by a country's information disclosure, accounting standards, and financial transparency) are related to cross-country differences in the market risk premium volatility. We use the vector-autoregressive and implied cost of capital methods to extract time variation in risk premiums for 41 developed and emerging markets worldwide. Consistent with theoretical predictions, countries with better information environments tend to experience a lower risk premium volatility, even after controlling for various country variables that are potentially associated with variation in risk premiums. Our analysis of two exogenous events, specifically the 1997 Asian financial crisis and 2008 global financial crisis, further corroborates our key finding that information environments play an important role in explaining market risk premium variability.
DOI: 10.1287/mnsc.1110.1488
Fulltext Permission: none
Fulltext Availability: No Fulltext
Appears in Collections:NBS Journal Articles

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