Costs of Equity in North Africa’s Equity Markets: An Industrial Sector Study

45 Pages Posted: 12 Jan 2010 Last revised: 12 Jan 2011

Date Written: January 12, 2010

Abstract

This study estimates liquidity premiums using the recently developed Liu (2006) measure within a multifactor capital asset pricing model (CAPM) including size premiums and a time varying parameter model for the North African emerging markets of Algeria, Egypt, Morocco and Tunisia. The evidence suggests that size and liquidity effects are least significant in Morocco which is reflected in its low cost of equity while that in Egypt and Tunisia is significantly higher. Time varying profiles of liquidity betas provide evidence that Morocco and Egypt have been affected by the 2007 2008 global financial crisis while the Tunisian market is relatively unaffected.

Keywords: Liquidity, CAPM, Kalman filter, Emerging Financial Markets, North Africa

JEL Classification: G11, G12, G15, O55

Suggested Citation

Hearn, Bruce Allen, Costs of Equity in North Africa’s Equity Markets: An Industrial Sector Study (January 12, 2010). Emerging Markets Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1535427

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

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