Governance, Stock Market Risks and Appraisal Ratios

10 Pages Posted: 4 Nov 2005

See all articles by Vincent J. Hooper

Vincent J. Hooper

Xiamen University

Ah Boon Sim

UNSW Australia Business School, School of Banking and Finance; Financial Research Network (FIRN)

Asfandyar Uppal

UNSW Australia Business School, School of Banking and Finance

Date Written: October 2005

Abstract

The purpose of this paper is to examine the effect of governance environments upon stock market risks and Appraisal ratios for developed and emerging stock markets over the time period January 1995 to December 2002. Using an augmented international capital asset pricing model (ICAPM) model and allowing for the control of risk factors, we find that governance environments have a significant influence on the total and idiosyncratic risks of stock markets, and subsequently their Appraisal ratios. The results have policy implications for government policy setters as improvements to governance environments may reduce the cost of capital. The results also have implications for active portfolio managers with investments in emerging markets.

Keywords: Appraisal Ratio, Governance, ICAPM

JEL Classification: G15

Suggested Citation

Hooper, Vincent James and Sim, Ah Boon and Uppal, Asfandyar, Governance, Stock Market Risks and Appraisal Ratios (October 2005). Available at SSRN: https://ssrn.com/abstract=833685 or http://dx.doi.org/10.2139/ssrn.833685

Ah Boon Sim

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Asfandyar Uppal

UNSW Australia Business School, School of Banking and Finance

Sydney, NSW 2052
Australia

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