Stock Markets in the Russian Federation, Transitional Europe & the United States: Profitability vs. Pessimism/Optimism
Academy of Finance Proceedings, pp. 1-9, 2003
9 Pages Posted: 22 Nov 2009
Date Written: 2003
Abstract
This study develops and estimates the level of profitability and pessimism/optimism in the stock markets of the Russian Federation, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovenia and compares them with the U.S. market. The risk premium associated with the volatility in each market is taken as a proxy for profitability while the pessimism/optimism is estimated as the ratio of the volatility given a negative shock versus a positive shock, of the same magnitude. The results indicate that while none of the newer markets as well as the more mature U.S. market displays a risk premium in their daily log returns, the newer markets, in general, show optimism. This apparent optimism documented for the newer markets could be indicative of the fact that these markets are growing at a faster pace with the passage of time.
Keywords: Profitability, Pessimism, Optimism, Volatility, Risk premium, Emerging stock markets
JEL Classification: G11, G12, G15
Suggested Citation: Suggested Citation