Information Environment and Equity Risk Premium Volatility Around the World

• 成果类型: Article
• 署名作者: Lau, Sie Ting; Ng, Lilian; Zhang, Bohui
• 署名单位: Nanyang Technological University; University of Wisconsin System; University of Wisconsin Milwaukee; University of New South Wales Sydney
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.1110.1488
• 发表日期: 2012
• 页码: 1322-1340
• 关键词: market risk premium volatility; information environments; Implied cost of capital; VaR

摘要

This paper examines whether and how differences in investors' information environments (measured by a country's information disclosure, accounting standards, and financial transparency) are related to cross-country differences in the market risk premium volatility. We use the vector-autoregressive and implied cost of capital methods to extract time variation in risk premiums for 41 developed and emerging markets worldwide. Consistent with theoretical predictions, countries with better information environments tend to experience a lower risk premium volatility, even after controlling for various country variables that are potentially associated with variation in risk premiums. Our analysis of two exogenous events, specifically the 1997 Asian financial crisis and 2008 global financial crisis, further corroborates our key finding that information environments play an important role in explaining market risk premium variability.