Costs of Equity in North Africa’s Equity Markets : An Industrial Sector Study

This study estimates liquidity premiums using the recently developed Liu (2006) measure within a multifactor capital asset pricing model (CAPM) including size premiums and a time varying parameter model for the North African emerging markets of Algeria, Egypt, Morocco and Tunisia. The evidence suggests that size and liquidity effects are least significant in Morocco which is reflected in its low cost of equity while that in Egypt and Tunisia is significantly higher. Time varying profiles of liquidity betas provide evidence that Morocco and Egypt have been affected by the 2007 2008 global financial crisis while the Tunisian market is relatively unaffected