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Excess market returns

Table 5 shows the average excess market returns for the emerging markets, the excess returns are the company returns minus the risk-free rate. The excess returns, the returns minus the risk-free rate added by the country risk premium are also displayed. Table 5 shows that there is a positive risk return tradeoff. According to the CAPM, on average, the realized market excess returns should be positive although in some periods they can be negative. The table shows that the excess returns are positive when only the risk-free rate is considered for the total period and period before the financial crisis. Interestingly, Egypt has a positive excess return during the crisis. When the country risk premium is taken into account the positive excess returns become negative. The only country with positive excess returns when the country risk premium is considered is Morocco, except for the period during the crisis. Appendix E shows the graphical depictions of the excess returns of the four emerging markets.

Table 5: Excess market returns of four emerging markets

	Jan 5^th 2001 – Sept 25^th 2009 (Total period)		Jan 5^th 2001 – Aug 29^th 2008 (Before crisis)		Aug 29^th2008 – Sept 25^th 2009 (During crisis)
Country
Egypt	.33	-.23	.36	.02	.12	-.80
Israel	.00	-.16	.03	-.07	-.18	-.47
Morocco	.21	.02	.27	.15	-.23	-.54
Turkey	.12	-.34	.17	-.27	-.24	-.74

Note: is the 10-year US treasury bill

is the spread between a 10-year US Credit Default Swap (CDS) and a similar sovereign CDS