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Time-Varying Risk Premia in Large International Equity Markets

72 Pages Posted: 18 Jan 2018 Last revised: 31 Jan 2018

Ines Chaieb

University of Geneva and Swiss Finance Institute; Swiss Finance Institute

Hugues Langlois

HEC Paris - Finance Department

O. Scaillet

University of Geneva GSEM and GFRI; Swiss Finance Institute

Date Written: January 17, 2018

Abstract

We estimate international factor models with time-varying factor exposures and risk premia at the individual stock level using a large unbalanced panel of 58,674 stocks in 46 countries over the 1985-2017 period. We consider market, size, value, momentum, profitability, and investment factors aggregated at the country, regional, and world level. The country market in excess of the world or regional market is required in addition to world or regional factors to capture the factor structure for both developed and emerging markets. We do not reject mixed CAPM models with regional and excess country market factors for 76% of the countries. We do not reject mixed multi-factor models in 80% to 94% of countries. Value and momentum premia show more variability over time and across countries than profitability and investment premia. The excess country market premium is statistically significant in many developed and emerging markets but economically larger in emerging markets.

Keywords: large panel, approximate factor model, risk premium, international asset pricing, market integration

JEL Classification: C12, C13, C23, C51, C52 , G12, G15

Suggested Citation

Chaieb, Ines and Langlois, Hugues and Scaillet , O., Time-Varying Risk Premia in Large International Equity Markets (January 17, 2018). Swiss Finance Institute Research Paper No. 18-04; HEC Paris Research Paper No. FIN-2018-1250. Available at SSRN: https://ssrn.com/abstract=3103752

Ines Chaieb (Contact Author)

University of Geneva and Swiss Finance Institute ( email )

Geneva Finance Research Institute
UniMail, 40 Bd Pont d'Arve
Geneva, CH - 1211
Switzerland
+41223798568 (Phone)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Hugues Langlois

HEC Paris - Finance Department ( email )

France

Olivier Scaillet

University of Geneva GSEM and GFRI ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland
+ 41 22 379 88 16 (Phone)
+41 22 389 81 04 (Fax)

HOME PAGE: http://www.scaillet.ch

Swiss Finance Institute

40, Boulevard du Pont-d'Arve
40, Bd du Pont-d'Arve
1211 Geneva 4, CH-6900
Switzerland

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