Titre : |
How to estimate an appropriate cost of equity in Emerging markets? |
Type de document : |
Mémoire |
Auteurs : |
Alexandre SIMONEL, Auteur |
Année de publication : |
2021 |
Importance : |
30 p. |
Langues : |
Anglais (eng) |
Mots-clés : |
Management INVESTISSEMENT ; RISQUE ; PAYS EN DEVELOPPEMENT
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Résumé : |
This paper deals with the specificities of estimating the cost of equity in emerging markets. We first determine what characterizes an emerging market, as well as the main specific risks to take into account. We identify six specific risks related to the foreign exchange rate, the non-normal distribution of returns, the correlation of emerging markets with developed markets, their liquidity, as well as the problems of data reliability. Following this, we look at the current means of estimating the cost of equity, which are mainly used for developed markets, and we see to what extent they are not adapted to emerging markets specificities. We then study adjusted and alternative models in order to estimate which ones may be the most appropriate according to the characteristics of the target market. We will then conclude with the steps to select a model: Determine availability of data in target country, degree of financial integration and reliability and usefulness of target country data.Finally, we will apply a model selection for valuing an investment in one of the fastest growing emerging markets, China, and we will see to what extent the selected models can be applied
from an operational point of view. We conclude this paper with the finding that adjusted and alternative models, although the fact that they take into account certain specificities of emerging markets, do not manage to take into account all of the specific risks determined above. In addition to the model selection steps, a thorough and complete analysis of market-specific risks is therefore essential. |
Programme : |
MSc Finance, Investment & Wealth Management |
Permalink : |
https://cataloguelibrary.neoma-bs.fr/index.php?lvl=notice_display&id=538615 |
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