Serbia Equity Risk Premium Decomposition (2015–2025)

This dataset provides quarterly estimates of Serbia’s equity risk premium (ERP) decomposed into four structural components: sovereign risk (CRP), liquidity risk (LP), behavioral or sentiment risk (BP), and institutional quality risk (IQP). The series cover the period 2015Q1–2025Q3 and are expressed in percentage points, capturing how each premium contributes to Serbia’s total cost of equity.

The data were constructed from multiple reliable sources, including CEIC Data, the Belgrade Stock Exchange (BELEX), Bloomberg, Damodaran’s country risk spreadsheets, and governance indicators from the World Bank (WGI) and Transparency International (CPI). Each component is estimated using a transparent, data-driven empirical framework:

The sovereign risk premium (CRP) follows Damodaran’s volatility-adjusted spread method.

The liquidity premium (LP) is derived from principal component analysis of bid–ask spreads, turnover ratios, and Amihud illiquidity metrics.

The behavioral premium (BP) is estimated from an EGARCH-in-Mean model capturing volatility feedback in BELEX15 returns.

The institutional quality premium (IQP) aggregates standardized governance and corruption indices through principal component analysis.

The dataset supports the study “Decomposing Serbia’s Equity Risk Premium: Liquidity and Institutional Constraints in a Frontier Market” and enables replication or extension of the analysis for other emerging and frontier markets. It provides insight into how structural factors—rather than macroeconomic volatility alone—shape equity pricing in small, underdeveloped capital markets.

The accompanying figure (“Decomposition of Serbia’s ERP, 2015–2025”) visualizes the quarterly evolution of the four components.

Variables:

Date (Quarter, 2015Q1–2025Q3)

CRP – Sovereign Risk Premium (%)

LP – Liquidity Premium (%)

BP – Behavioral Premium (%)

IQP – Institutional Quality Premium (%)