Rationalizing the value premium in emerging markets

Ebrahim, M.S. and Girma, S. and Shah, M.E. and Williams, J.M. (2013) Rationalizing the value premium in emerging markets. Journal of International Financial Markets, Institutions and Money, 29. pp. 51-70. DOI: 10.1016/j.intfin.2013.11.005

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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
Subjects: Research Publications
Departments: College of Business, Law, Education and Social Sciences > Bangor Business School
Date Deposited: 27 Aug 2015 02:12
Last Modified: 23 Sep 2015 03:01
ISSN: 1042-4431
URI: http://e.bangor.ac.uk/id/eprint/5291
Identification Number: DOI: 10.1016/j.intfin.2013.11.005
Publisher: Elsevier
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