Open AccessCountry Risk Premium: The Case of Chile
Author(s) -
Zocimo Campos,
Juan Tapia Gertosio,
Paulina Gudaris
Publication year - 2021
Publication title -
revista finanzas y política económica/revista finanzas y política económica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.121
H-Index - 3
eISSN - 2248-6046
pISSN - 2011-7663
DOI - 10.14718/revfinanzpolitecon.v13.n2.2021.3
Subject(s) - risk premium , liquidity premium , economics , estimation , stock (firearms) , econometrics , volatility risk premium , differential (mechanical device) , economic risk , stock market , financial economics , geography , monetary economics , engineering , volatility (finance) , context (archaeology) , management , archaeology , volatility smile , aerospace engineering , market liquidity , liquidity crisis
Currently there is no agreed method to estimate the Risk Premium accurately, therefore, different authors arrive at significantly different results when calculating the risk premium for a given country or industry. This work estimates the risk premium of the Chilean stock market (PRM) for the period 1993-2020 using different estimation methodologies (Differential Returns, Implicit Return in Current Stock Prices). The results indicate, depending on the methodology used, a Premium for Risk that ranges between 1,91% and 10,28%, which shows the existence of a positive premium for assuming risk in Chile that ranges around 5,3%.