How Underlying Dimensions of Political Risk Affect Excess Return in Emerging and Developed Markets

IF 1.2 Q3 BUSINESS, FINANCE

Journal of Emerging Market Finance Pub Date : 2019-03-28 DOI:10.1177/0972652719831540

I. Q. Nesset, Ingrid Bøgeberg, Frode Kjærland, L. Molden

引用次数: 10

Abstract

Political risk is expected to increase due to emerging markets’ increasing influence on the world economy. We identify legal, tension, conflict and policy as underlying dimensions through principal component analysis by using a disaggregated political risk index. Using a two-way error correction model, ethnic and religious tension is identified as a new and distinct dimension of political risk. Consequently, global investors are likely to benefit from understanding which dimension implies a reward. Investors in particular should direct their attention towards tension, which seems to command a risk premium regardless of both market and time. JEL Classification: C33, F30, F50, G15

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政治风险的基本维度如何影响新兴和发达市场的超额收益

由于新兴市场对世界经济的影响力越来越大，政治风险预计将增加。我们通过使用分类政治风险指数的主成分分析，将法律、紧张局势、冲突和政策确定为潜在层面。使用双向纠错模型，种族和宗教紧张被确定为政治风险的一个新的、独特的维度。因此，全球投资者可能会从理解哪一个维度意味着回报中受益。投资者尤其应该将注意力集中在紧张局势上，无论市场和时间如何，紧张局势似乎都会带来风险溢价。JEL分类：C33、F30、F50、G15

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Emerging Market Finance BUSINESS, FINANCE-

CiteScore

1.80

自引率

33.30%

发文量

期刊介绍： The Journal of Emerging Market Finance is a forum for debate and discussion on the theory and practice of finance in emerging markets. While the emphasis is on articles that are of practical significance, the journal also covers theoretical and conceptual aspects relating to emerging financial markets. Peer-reviewed, the journal is equally useful to practitioners and to banking and investment companies as to scholars.