Evaluation of a Company-Specific Risk Premium on Emerging Markets : A New Approach

Changing economic environments, geopolitical instability, and the explosive growth of emerging markets, compounded by the recent turbulence in the world's capital markets, has posed new challenges for the study of asset pricing. The following study raises questions about the existence (lack of research and formulas) for calculating company-specific risks on emerging markets, which could significantly impact the final enterprise value. Based on my empirical research of emerging markets' data, a new approach for company-specific risk premium evaluation has been established. The new approach presented here below is the first step in developing a complex, company-specific, risk premium evaluation method. However it is flexible to further changes and modifications. Applying it, financial experts can more accurately and objectively estimate the rate of return on equity and subsequently enterprise value of companies on emerging markets