Comparative analysis of the equity risks: evidence from international markets

Abstract

Importance: quite often, insufficient attention to equity market risks can lead to loss of invested capital or expected income. In this regard, they are extremely relevant as an object of statistical analysis. Purpose: statistical analysis of the equity risks in international stock markets with use the asset pricing models. Research design: the methodology is based on parametric and non-parametric methods of statistical analysis. In this paper we used the excess returns of market portfolios, as well as the excess returns of 25 double-sorted quintile portfolios obtained through issuer «size», estimated by market capitalization at the end of the previous year, and «value», estimated by the book-to- market ratios, as the explanatory variables. The study covers the period from 2010 to 2021. Results: this paper found that factor exposure decomposition of equity risks with use the Sharpe-Lintner CAPM and the Fama-French 5-factor model made it possible to identify significant differences between developed stock markets in terms of sensitivity to non-diversifiable factors, mimicking equity risk, as well as in terms of residual risk, estimated as idiosyncratic volatility.