Country Equity Risk Modelling Using Dynamic Capital Asset Pricing Model in Selected Central and Eastern European Countries
Country Equity Risk Modelling Using Dynamic Capital Asset Pricing Model in Selected Central and Eastern European Countries

Summary/Abstract: The purpose of this paper is to empirically estimate country beta in a group of five selected CEE countries with an appropriately fitted model that accurately estimates the time-varying characteristics of beta. In methodological part we apply the multiple linear regression model and time-series autoregressive model, as well as statistical approaches for processing the secondary data. The paper finds that there is the existence of dynamic beta model within these countries that considers local as well as global economic effect. Global effects are more significant for the particular model we derived in the paper, and so this study also helps to determine the country risk with respect to the global index and global financial market variables. This paper reliably estimates country betas for the selected CEE countries. The time-varying beta is estimated using unanticipated time series autoregressive errors embedded in the multiple linear regression models which is rarely applied in the literature.

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