Analysis of country risk premium for the BRICS countries

Abstract

Description of the goal, tasks and main results The research aims to determine the country risk premium for the BRICS countries and examine the factors that affect it. As the stock portfolios of emerging countries proved to outperform the portfolios from the developed USA market, the annual country risk premium can be calculated. It is mostly influenced by the level of the country risk premium in the previous period. The spread between the yield of sovereign bonds of developed and emerging countries affects it in some of the countries. The deviations from the interest rate parity only impact the country risk premium in the general model for all countries. Individual country effects are significant and should be accounted for by running separate regression models for each country.