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Country risk premium: The case of Chile

Revista Finanzas y Politica Economica, ISSN: 2011-7663, Vol: 13, Issue: 2, Page: 317-344
2021
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Metric Options:   Counts1 Year3 Year

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Article Description

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%.

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