Financial Economics

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Conditional Pricing of Currency Risk in Africa's Equity Market
(AERC, 2018-12-01) Kodongo, Odongo; Ojah, Kalu
In this paper, we sought to establish whether Africa’s volatile currencies drive equity risk premium. We use the stochastic discount factor (SDF) framework to estimate various conditional specifications of the International Capital Asset Pricing Model through generalized method of moments technique. Our results show strong evidence of conditional, time-varying currency risk premium in equity returns. Currency risk is also perceived by international investors as important in informing the equities pricing kernel. We also find evidence that international investors are worried about Africa’s small size equity markets and build anticipated low trading into their pricing calculus.
Determinants of Venture Capital in Africa: Cross Section Evidence
(AERC, 2011-08) Adongo, Jonathan
This paper identifies the determinants of venture capital activity using a cross-sectional data set covering 36 African countries in a semi-logarithmic model. It finds that rule of law, R&D expenditure as a percentage of GDP and better information between investors and potential investees are positively and significantly related to venture capital activity in Africa. It also finds that capital gains tax rates are negatively and significantly related to venture capital activity on the continent.