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Modelling size and liquidity in North African industrial sectors

By Bruce Hearn

Abstract

This study estimates liquidity premiums using the recently developed Liu (2006) measure within a multifactor capital asset pricing model (CAPM) including size premiums and a time-varying parameter model for the North African emerging markets of Algeria, Egypt, Morocco and Tunisia. The evidence suggests that size and liquidity effects are least significant in Morocco which is reflected in its low cost of equity while that in Egypt and Tunisia is significantly higher. Time-varying profiles of liquidity betas provide evidence that Morocco and Egypt have been affected by the 2007/2008 global financial crisis while the Tunisian market is relatively unaffected

Topics: Liquidity, CAPM, Kalman filter, Emerging financial markets, North Africa
Publisher: Elsevier
Year: 2010
DOI identifier: 10.1016/j.ememar.2010.08.004
OAI identifier: oai:lra.le.ac.uk:2381/9304
Journal:

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