BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 27/2008:
Global and local sources of risk in Eastern European emerging stock markets
Elena Fedorova ()
and Mika Vaihekoski
Abstract: We study a pricing model for global and local sources of
risk in six Eastern European emerging stock markets. Utilizing GMM
estimation and an unconditional asset-pricing framework with and without
time-varying betas, we perform estimations based on monthly data from 1996
to 2007 for Poland, Czech Republic, Hungary, Bulgaria, Slovenia and Russia.
Most of these markets display considerable segmentation; the aggregate
emerging market risk, as opposed to global market risk, is the significant
driver for their stock market returns. It also appears that currency risk
is priced into stock prices. The difference between local and global
interest rates can be used to model the time-variation in the betas for
both sources of risk.
Keywords: market integration; segmentation; asset pricing; emerging markets; Eastern Europe country risk; (follow links to similar papers)
JEL-Codes: G12; G15; G32; (follow links to similar papers)
32 pages, December 15, 2008
Fedorova, E. and Vaihekoski, M.: Global and Local Sources of Risk in Eastern European Emerging Stock Markets Published in: Finance a úvér – Czech Journal of Economics and Finance, 2009, vol. 59, no. 1, 2-19. http://journal.fsv.cuni.cz/mag/article/show/id/1149
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