The downside risk approach to cost of equity determination for Slovenian, Croatian and Serbian capital markets

Simple item page
dc.contributor.authorMomcilovic, Mirela
dc.contributor.authorZivkov, Dejan
dc.contributor.authorBegovic, Sanja Vlaovic
dc.contributor.otherEkonomická fakultacs
dc.date.accessioned2017-10-02
dc.date.available2017-10-02
dc.date.issued2017-10-02
dc.description.abstractIn developed countries Capital Asset Pricing Model (CAPM) is the most frequently used model for determination of the cost of equity. On the other hand, there is no consensus about which model would be the most appropriate and easy to use for the estimation of cost of equity in emerging markets. The aim of this research is to analyze on the basis of Estrada’s work (2000; 2007) four different risk measures based on standard deviation, beta, downside risk and downside beta, as well as corresponding asset pricing models for capital markets of Slovenia, Croatia and Serbia in order to determine the most appropriate asset pricing model and to estimate the costs of equity for selected markets. It should be pointed out that asset pricing research in general is scarce for selected markets and that similar research was not done for them. Results of the research show that for total selected market the most appropriate risk measure out of four proposed is downside risk, while the model that best explains full sample mean returns contains combination of downside risk and downside beta. Results of the research favor downside risk measure for each selected market. When considering multiple regressions with the highest explanatory power for each selected market, results show that all multiple regressions contain downside risk as a risk variable and beta or downside beta as additional systematic risk variable, indicating one more time importance of downside risk for Slovenian, Croatian and Serbian capital markets. The results show that the average cost of equity estimated on the basis of asset pricing model with downside risk as a risk measure amounts to 20.16% for full sample. The results also indicate that Serbia has the highest cost of equity and that the cost of equity for Slovenian and Croatian capital markets is lower and rather similar.en
dc.formattext
dc.format.extent12 s.cs
dc.identifier.doi10.15240/tul/001/2017-3-010
dc.identifier.eissn2336-5604
dc.identifier.issn1212-3609
dc.identifier.urihttps://dspace.tul.cz/handle/15240/20920
dc.language.isoen
dc.publisherTechnical university of Liberec, Czech Republicen
dc.publisherTechnická Univerzita v Libercics
dc.publisher.abbreviationTUL
dc.relation.isbasedonArtavanis, N., Diacogiannis, G., & Mylonakis, J. (2010). The D-CAPM: The Case of Great Britain and France. International Journal of Economics and Finance, 2(3), 25-38. doi:10.5539/ijef.v2n3p25.
dc.relation.isbasedonBekaert, G., Erb, C., Harvey, C., & Viskanta, E. (1998). Distributional Characteristics of Emerging Market Returns and Asset Allocation. Journal of Portfolio Management, 24(2), 102-116. doi:10.3905/jpm.24.2.102.
dc.relation.isbasedonBekaert, G., & Harvey, C. (2000). Foreign Speculators and Emerging Equity Markets. Journal of Finance, 55(2), 565-613. doi:10.1111/0022-1082.00220.
dc.relation.isbasedonBekaert, G., & Harvey, C. (2002). Research in Emerging Markets Finance: Looking to the future. Emerging Markets Review, 3(4), 429-448. doi:10.1016/S1566-0141(02)00045-6.
dc.relation.isbasedonBekaert, G., Harvey, C., & Lundblad, C. (2007). Liquidity and Expected Returns: Lessons from Emerging Markets. The Review of Financial Studies, 20(5), 1783-1831. doi:10.1093/rfs/hhm030.
dc.relation.isbasedonBekaert, G., Harvey, C., Lundblad, C., & Siegel, S. (2011). What Segments Equity Markets. Review of Financial Studies, 24(12), 3841-3890. doi:10.1093/rfs/hhr082.
dc.relation.isbasedonBekaert, G., & Harvey, C. (2014). Emerging equity markets in a globalizing world. Tilburg: Netspar. Retrieved February 3, 2015, from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2344817.
dc.relation.isbasedonBorys, M. (2011). Testing Multi-Factor Asset Pricing Models in the Visegrad Countries. Czech Journal of Economics and Finance, 61(2), 118-139.
dc.relation.isbasedonChen, N. F., Roll, R., & Ross, S. A., (1986). Economic Forces and the Stock Market. Journal of Business, 59(3), 383-403.
dc.relation.isbasedonCollins, D., & Abrahamson, M. (2006). Measuring the Cost of Equity in African Financial Markets. Emerging Markets Review, 7(1), 67-81. doi:10.1016/j.ememar.2005.06.003.
dc.relation.isbasedonDamodaran, A. (2009). Volatility Rules: Valuing Emerging Market Companies. Retrieved February 3, 2015, from http://people.stern.nyu.edu/adamodar/pdfiles/papers/emergmkts.pdf.
dc.relation.isbasedonDamodaran, A. (2015). Country Default Spreads and Risk Premiums. Retrieved February 3, 2015, from http://pages.stern.nyu.edu/~adamodar/.
dc.relation.isbasedonDimson, E., Marsh, P., & Staunton, M. (2011). Equity Premiums Around the World, Rethinking the Equity Risk Premium. CFA Institute. Retrieved February 3, 2015, from www.academicwebpages.com/preview/mehra/pdf/CFA%20RM.pdf.
dc.relation.isbasedonErb, C. B., Harvey, C., & Viskanta, T. E. (1996). Expected Returns and Volatility in 135 Countries. Journal of Portfolio Management, 22(3), 46-58. doi:10.2139/ssrn.871253.
dc.relation.isbasedonEstrada, J. (2000). The Cost of Equity in Emerging Markets: A Downside Risk Approach. Emerging Markets Quarterly, 4(Fall), 19-30.
dc.relation.isbasedonEstrada, J. (2002). Systematic Risk in Emerging Markets: the D-CAPM. Emerging Markets Review, 3(4), 365-379. doi:10.1016/S1566-0141(02)00042-0.
dc.relation.isbasedonEstrada, J. (2007). Mean-semivariance Behavior: Downside Risk and Capital Asset Pricing. International Review of Economics and Finance, 16(2), 169-185. doi:10.1016/j.iref.2005.03.003.
dc.relation.isbasedonFama, E. F., & French, K. R. (1992). The Cross-section of Expected Stock Returns. Journal of Finance, 47(2), 427-465. doi:10.1111/j.1540-6261.1992.tb04398.x
dc.relation.isbasedonFama, E. F., & French, K. R. (1993). Common Risk Factors in the Returns on Stocks and Bonds. Journal of Financial Economics, 33(1), 3-56. doi:10.1016/0304-405X(93)90023-5.
dc.relation.isbasedonGalagedera, D., & Brooks, R. (2007). Is Co-skewness a Better Measure of Risk in the Downside than Downside Beta? Evidence in Emerging Market Data. Journal of Multinational Financial Management, 17(3), 214-230. doi:10.1016/j.mulfin.2006.10.001.
dc.relation.isbasedonGalagedera, D. (2009). Economic Significance of Downside Risk in Developed and Emerging Markets. Applied Economic Letters, 16(16), 1627-1632. doi:10.1080/13504850701604060.
dc.relation.isbasedonGodfrey, S., & Ramon, E. (1996). A Practical Approach to Calculating Costs of Equity for Investment in Emerging Markets. Journal of Applied Corporate Finance, 9(3), 80-89. doi:10.1111/j.1745-6622.1996.tb00300.x.
dc.relation.isbasedonGrandes, M., Panigo, D., & Pasquini, R. (2010). On the estimation of the cost of equity in Latin America. Emerging Markets Review, 11(4), 373-389. doi:10.1016/j.ememar.2010.08.001.
dc.relation.isbasedonHarvey, C. (1995). The Risk Exposure of Emerging Equity Markets. World Bank Economic Review, 9(1), 19-50. doi:10.1093/wber/9.1.19.
dc.relation.isbasedonHearn, B., & Piesse, J. (2009). Sector Level Cost of Equity in African Financial Markets. Emerging Market Review, 10(4), 257-278. doi:10.1016/j.ememar.2009.09.002.
dc.relation.isbasedonHenry, P. B. (2000). Stock Market Liberalization, Economic Reform and Emerging Market Equity Prices. Journal of Finance, 55(2), 529-564. doi:10.1111/0022-1082.00219.
dc.relation.isbasedonKlernkosky, R. C., & Martin, J. D. (1975). The Effect of Market Risk on Portfolio Diversification. Journal of Finance, 30(1), 147-154. doi:10.1111/j.1540-6261.1975.tb03166.x
dc.relation.isbasedonLitner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budget. Review of Economics and Statistics, 47(1), 13-37. doi:10.2307/1924119.
dc.relation.isbasedonLiu, E. (2006). A Liquidity-augmented Capital Asset Pricing Model. Journal of Financial Economics, 82(3), 631-671. doi:10.1016/j.jfineco.2005.10.001.
dc.relation.isbasedonMinovic, J., & Zivkovic, B. (2012). The Impact of Liquidity and Size Premium on Equity Price Formation in Serbia. Economic Annals, 57(195), 43-78. doi:10.2298/EKA1295043M.
dc.relation.isbasedonMinovic, J., & Zivkovic, B. (2014). CAPM Augmented with Liquidity and Size Premium in the Croatian Stock Market. Economic Research, 27(1), 191-206. doi:10.1080/1331677X.2014.952107.
dc.relation.isbasedonMSCI. (2015). MSCI World Index. Retrieved February 3, 2015, from http://www.msci.com/products/indexes/size/standard/performance.html.
dc.relation.isbasedonMomcilovic, M., Vlaovic Begovic, S., & Zivkov, D. (2015). Cost of equity: the case of Serbian food industry. Custos e @gronegocio on line, 11(1), 184-197.
dc.relation.isbasedonNewey, W. K., & West, K. D. (1987). A Positive Semi-definite, Heteroskedasticity and Autocorrelation-consistent Covariance Matrix. Econometrica, 55(3), 703-708. doi:10.2307/1913610.
dc.relation.isbasedonPicerno, J. (2014). Risk Premia Forecasts. Retrieved February 3, 2015, from http://www.capitalspectator.com/risk-premia-forecasts-4-november-2014/.
dc.relation.isbasedonRoss, S. (1976). The Arbitrage Theory of Capital Asset Pricing. Journal of Economic Theory, 13(3), 341-360. doi:10.1016/0022-0531(76)90046-6.
dc.relation.isbasedonSharpe, W. F. (1964). Capital Asset Prices – A Theory of Market Equilibrium under Condition of Risk. Journal of Finance, 19(3), 425-442. doi:10.1111/j.1540-6261.1964.tb02865.x.
dc.relation.isbasedonUS Treasury. (2015). Retrieved February 3, 2015, from http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2015.
dc.relation.isbasedonWagner, W. H., & Lau, S. C. (1971). The Effect of Diversification on Risk. Financial Analysts Journal, 27(6), 48-53.
dc.relation.ispartofEkonomie a Managementcs
dc.relation.ispartofEconomics and Managementen
dc.relation.isrefereedtrue
dc.rightsCC BY-NC
dc.subjectasset pricingen
dc.subjectbetaen
dc.subjecttotal risken
dc.subjectdownside risken
dc.subjectdownside betaen
dc.subjectcost of equityen
dc.subjectemerging marketsen
dc.subject.classificationG12
dc.subject.classificationG15
dc.titleThe downside risk approach to cost of equity determination for Slovenian, Croatian and Serbian capital marketsen
dc.typeArticleen
local.accessopen
local.citation.epage158
local.citation.spage147
local.facultyFaculty of Economics
local.fulltextyes
local.relation.abbreviationE+Mcs
local.relation.abbreviationE&Men
local.relation.issue3
local.relation.volume20
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
EM_3_2017_10.pdf
Size:
921.43 KB
Format:
Adobe Portable Document Format
Description:
Článek
Download
Collections
Číslo 3