%0 Journal Article
%T How Underlying Dimensions of Political Risk Affect Excess Return in Emerging and Developed Markets
%A Frode Kj£¿rland
%A Ida Q. Nesset
%A Ingrid B£¿geberg
%A Lars H. Molden
%J Journal of Emerging Market Finance
%@ 0973-0710
%D 2019
%R 10.1177/0972652719831540
%X Political risk is expected to increase due to emerging markets¡¯ increasing influence on the world economy. We identify legal, tension, conflict and policy as underlying dimensions through principal component analysis by using a disaggregated political risk index. Using a two-way error correction model, ethnic and religious tension is identified as a new and distinct dimension of political risk. Consequently, global investors are likely to benefit from understanding which dimension implies a reward. Investors in particular should direct their attention towards tension, which seems to command a risk premium regardless of both market and time. JEL Classification: C33, F30, F50, G1
%K Political risk
%K emerging markets
%K principal component analysis
%K ethnic tensions
%K religious tensions
%U https://journals.sagepub.com/doi/full/10.1177/0972652719831540