Estimation of the cost of capital is difficult in developed markets and even more difficult in emerging markets. Investments in the emerging markets are more risky than in the developed markets but return is also higher. The key question here is whether the return on investments in emerging...

ERP (equity risk premium) is one of the inputs in investment valuation models and it is very important to correctly determine a country risk premium for ERP in emerging markets. In this paper I am testing empirically if relative equity market standard deviations approach by A. Damodaran can be...