Rationalizing the value premium in emerging markets

Ebrahim, M. Shahid, Girma, Sourafel, Shah, M. Eskandar and Williams, Jonathan (2014) Rationalizing the value premium in emerging markets. Journal of International Financial Markets, Institutions and Money, 29 . pp. 51-70. ISSN 1042-4431

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We reconfirm the presence of value premium in emerging markets. Using the Brazil–Turkey–India–China (BTIC) grouping during a period of substantial economic growth and stock market development, we attribute the premium to the investment patterns of glamour firms. We conjecture based on empirical evidence that glamour firms hoard cash, which delays undertaking of growth options, especially in poor economic conditions. Whilst this helps to mitigate business risk, it lowers market valuations and drives down expected returns. Our evidence supports arguments that the value premium is explained by economic fundamentals rather than a risk factor that is common to all firms.

Item Type: Article
RIS ID: https://nottingham-repository.worktribe.com/output/725414
Keywords: Asset Pricing, Growth (i.e., Glamour) Stocks, Multifactor Models, Real Options, Value (i.e., Unspectacular) Stocks.
Schools/Departments: University of Nottingham, UK > Faculty of Social Sciences > School of Economics
Identification Number: https://doi.org/10.1016/j.intfin.2013.11.005
Depositing User: Girma, Sourafel
Date Deposited: 11 Oct 2017 08:54
Last Modified: 04 May 2020 16:45
URI: https://eprints.nottingham.ac.uk/id/eprint/47147

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