Country Risk Premium Assessment in Emerging Capital Markets. Empirical Evidence from Russian Stock Market

Abstract

Author: Teimuraz Teimurazovich Vashakmadze - National Research University "Higher School of Economics."

ERP (equity risk premium) is one of the inputs in investment valuation models and it is very important to correctly determine a country risk premium for ERP in emerging markets. In this paper I am testing empirically if relative equity market standard deviations approach by A. Damodaran can be used for determining ERP for emerging markets. The results of empirical research show that the use of the approach can lead to incorrect calculation of ERP for Russian market and hence in errors during investment valuation.