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Country Risk: Determinants, Measures, and Implications - The 2024 Edition

2024
  • 0
    Citations
  • 35,681
    Usage
  • 12
    Captures
  • 2
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    35,681
    • Abstract Views
      22,884
    • Downloads
      12,797
  • Captures
    12
    • Readers
      10
      • SSRN
        10
    • Exports-Saves
      2
      • SSRN
        2
  • Mentions
    2
    • Blog Mentions
      1
      • Blog
        1
    • News Mentions
      1
      • 1
  • Ratings
    • Download Rank
      795

Most Recent News

Country Risk: My 2024 Data Update

After the 2008 market crisis, I resolved that I would be far more organized in my assessments and updating of equity risk premiums, in the

Paper Description

As companies and investors globalize, we are increasingly faced with estimation questions about the risk associated with this globalization. When investors invest in China Mobile, Infosys or Vale, they may be rewarded with higher returns, but they are also exposed to additional risk. When Siemens and Apple push for growth in Asia and Latin America, they clearly are exposed to the political and economic turmoil that often characterize these markets. In practical terms, how, if at all, should we adjust for this additional risk? We will begin the paper with an overview of overall country risk, its sources, and measures. We will continue with a discussion of sovereign default risk and examine sovereign ratings and credit default swaps (CDS) as measures of that risk. We will extend that discussion to look at country risk from the perspective of equity investors, by looking at equity risk premiums for different countries and consequences for valuation. In the fourth section, we argue that a company's exposure to country risk should not be determined by where it is incorporated and traded. By that measure, neither Coca Cola nor Nestle are exposed to country risk. Exposure to country risk should come from a company's operations, making country risk a critical component of the valuation of almost every large multinational corporation. In the final section, we will also look at how to move across currencies in valuation and capital budgeting, and how to avoid mismatching errors.

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