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First Draft: July 2000 (This Draft: July 2002) Forthcoming in the Journal of Financial Economics
- Publisher
- SAGE
- Copyright
- © 2012 SAGE Publications
- ISSN
- 2277-9787
- eISSN
- 2321-0273
- DOI
- 10.1177/227797871200100107
- Publisher site
- See Article on Publisher Site
Abstract
The article explores the role of the political regime on asset returns in an International Capital Asset Pricing Model (CAPM) framework based on a sample of 17 emerging countries. The results reveal that the political regime has substantial impact on average stock returns. Firms in autocratic regimes have higher average returns that exceed the required returns. This is consistent with the fact that autocratic institutions have compensations for greater chances of bankruptcy, political instability and nationalization of assets. Results are robust to an alternative model to the standard CAPM risk model as well as to an unbalanced sample of countries.
Journal
South Asian Journal of Macroeconomics and Public Finance – SAGE
Published: Jun 1, 2012