Article: Towards a deeper comprehension of unlevered betas in emerging markets: Gordon and a regression stock valuation model Journal: International Journal of Economic Policy in Emerging Economies (IJEPEE) 2023 Vol.17 No.4 pp.586 - 599 Abstract: Unlevered betas determination in emerging markets remains a challenge because of the lack of formal tropicalised procedures. Replication of methods built for developed markets only generate biases. The study proposes a standardised procedure through the match of two asset pricing models in order to calculate unlevered betas more appropriately for a specific industry in an emerging market. The paper found that the model proposed permits a successful calculation of an unlevered beta which significantly correlates with the one estimated through the market line's slope without recurring to any preconceived indicators from developed markets. Also, the CAPM is reconfirmed as an appropriate opportunity cost for valuation, but dismisses inflation and country risk as part of its composition. Additionally, the paper identifies the main challenges among unlevered betas' calculation in emerging countries and proposes future research opportunities regarding this issue. Inderscience Publishers - linking academia, business and industry through research

Title: Towards a deeper comprehension of unlevered betas in emerging markets: Gordon and a regression stock valuation model

Authors: Pablo José Arana Barbier

Addresses: CENTRUM Católica Graduate Business School (CCGBS), Pontificia Universidad Católica del Perú (PUCP), Lima, Perú Jr. Daniel Alomía Robles 125, Urb. Los Álamos de Monterrico, Santiago de Surco, 15023, Lima, Peru

Abstract: Unlevered betas determination in emerging markets remains a challenge because of the lack of formal tropicalised procedures. Replication of methods built for developed markets only generate biases. The study proposes a standardised procedure through the match of two asset pricing models in order to calculate unlevered betas more appropriately for a specific industry in an emerging market. The paper found that the model proposed permits a successful calculation of an unlevered beta which significantly correlates with the one estimated through the market line's slope without recurring to any preconceived indicators from developed markets. Also, the CAPM is reconfirmed as an appropriate opportunity cost for valuation, but dismisses inflation and country risk as part of its composition. Additionally, the paper identifies the main challenges among unlevered betas' calculation in emerging countries and proposes future research opportunities regarding this issue.

Keywords: asset pricing; capital asset pricing model; CAPM; emerging markets; levered betas; panel data multiple linear regression; perpetuity; stock valuation; stock valuation in emerging countries; unlevered betas; valuation models.

DOI: 10.1504/IJEPEE.2023.132536

International Journal of Economic Policy in Emerging Economies, 2023 Vol.17 No.4, pp.586 - 599

Received: 28 Dec 2021
Accepted: 25 Jun 2022
Published online: 27 Jul 2023 *

Title: Towards a deeper comprehension of unlevered betas in emerging markets: Gordon and a regression stock valuation model

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