قدرت تبیینی ریسک سیاسی در بازارهای نوظهور

There is substantial argument that political risk is an important and increasing influence on international portfolio allocation decisions. The purpose of this paper is to investigate the relation between political risk and stock returns within the context of emerging markets. The issue is examined using a framework that controls for global and local return influences. Consistent with the paper's predictions, the findings reveal that political risk is important in explaining return variation in individual emerging markets, particularly in the Pacific Basin, but not in developed markets. At an aggregate portfolio level, supportive evidence is found of a positive relation between political risk and ex-post returns in emerging markets that is robust to alternative risk measures, and more prevalent during the 1990s.

The purpose of this study is to test for an association between political risk and emerging stock market returns. The globalisation and integration of capital markets has opened up new investment opportunities for international investors. As such, political risk has become an increasingly important concern when making international portfolio allocation decisions. As emerging stock markets tend to be located in developing countries, which are prone to periods of political instability (Diamonte, Liew, & Stevens, 1996), they provide a useful setting for an examination of the relation between political risk and stock market returns. The concept of political risk is broad and encompasses many facets. However, it might be generally described as the risk that arises from the potential actions of governments and other influential domestic forces, which threaten expected returns on investment. Political risk is an important consideration when making international asset allocation decisions, particularly when the investment set includes emerging markets. Government actions and political events have the potential to substantially alter the value of an investment portfolio. While the concept of political risk is generally accepted as a relevant consideration in investment analysis, there is little available research that examines the relation between stock returns and political risk. A problem with investigating this topic is that the factors associated with political risk are typically qualitative in nature. However, testing the relation between such factors and stock returns requires a quantitative measure. In this paper, quantitative political risk data, sourced from a risk rating system (Political Risk Services), are employed. While these data have been studied previously (e.g., Diamonte et al., 1996 and Erb et al., 1996), this paper extends the literature through two main contributions. First, the paper presents a model of return variation that incorporates political risk after taking into account both global and local influences on returns. Given that many factors have been shown to relate to returns, an approach is required that controls for the impact of these factors. Prior work has generally considered the univariate relation between political risk and returns (e.g., Erb et al., 1996), whereas this paper tests whether political risk provides any further information over that already impounded by other influences. Hence, the paper is able to examine the incremental explanatory power of political risk. Second, the impact of political risk is considered at both an individual country level and an aggregated portfolio level. Prior studies have considered either the impact of political risk in a specific market or in the context of an aggregated portfolio. However, from a practitioner's perspective, an examination of political risk is important at both the level of the individual market for market/stock selection decisions, and the aggregated level for asset allocation decisions. The paper employs monthly data over the period 1985–1997 and a sample of 17 emerging markets. For comparative purposes, a sample of 18 developed markets is also considered. The results show that several emerging markets exhibit a significant relation between political risk and stock returns, particularly those in the Pacific Basin. In contrast, apart from one market, there is no evidence of a significant relation in the developed markets sample. Further, at the aggregated portfolio level, the findings show a significant relation between political risk and returns only in emerging markets. This result is most apparent in the most recent subperiod of the 1990s. The remainder of the paper is organised as follows. Section 2 considers the nature of political risk in emerging markets. Section 3 discusses the models employed in the paper. Section 4 presents a description of the returns and political risk data. Section 5 presents the results and Section 6 contains the conclusions.

This paper has presented evidence that political risk may be able to explain some of the variation in emerging stock market returns at both the country and aggregate portfolio levels. This explanatory power is in addition to that provided by return variation in the world market portfolio and local influences. At the individual country level, the relation between returns and political risk appears far more prevalent in emerging markets, particularly those in the Pacific Basin, than in developed markets. Moreover, in contrast to emerging markets, political risk is insignificant at the aggregate level for developed markets. The results show that the aggregate relation between political risk and emerging stock market returns is most apparent in the latter part of the 1990s. These results add to the growing literature on the role of political risk and its association with stock market returns, particularly in the context of emerging markets. The findings raise a number of issues. First, the evidence that there is some political risk exposure in emerging markets that is different to any exposure in developed markets has implications for asset pricing and portfolio decisions in these markets. Second, a large number of international investors utilise specialist international mutual funds as their investment vehicle to gain access to emerging markets (in contrast to direct foreign share ownership). Hence, these investors are exposed to the ‘risk’ of the emerging markets portfolio. In this sense, any exposure of emerging markets at the aggregate portfolio level will be borne by such investors. Indeed, the results show that exposure to political risk at the aggregate level may well exist. Third, there is indirect but suggestive evidence that political risk itself is related to levels of capital market integration. This possibility opens an avenue for future research.