This paper explores intricacies of the higher equity risk premia of emerging Asian economies within the context of industrial composition. The conventional ex-post empirical analysis is executed to scrutinize the impact of industries on the country's stock performance, diverging from the contemporary literature on finance, which was restricted to "total market indexes." By utilizing the DataStream’s Total Return Indices (TRIs) data of emerging market industries, this study highlights the contribution of various industries towards higher equity risk premiums across prominent Asian emerging countries. The study unearths several salient empirical findings. Primarily, the study confirms the "high-volatile high-performance nature" in conjunction with the time-varying dynamics of excess returns for emerging markets at the industry level. Secondly, the study's findings identify the industries accountable for the most significant contribution to higher stock premia of emerging markets at both the country and dynamic context levels. Thirdly, we observe that certain industries demonstrate greater exposure to global factors than others. It is, therefore, argued that these observations provide a crucial indication for international portfolio diversification. The investigation of diversification opportunities due to the impact of global factors on country indexes, and the existence of some industries that offer little but advantageous insurance components provide valuable insights for the higher equity premia of emerging markets. The overall study findings suggest that foreign portfolio investors must not only diversify across countries but also across industries to generate augmented returns in emerging stock markets.

Keywords: Emerging Stock Premia; Industrial Excess Returns; Time-dependent Performances; Asian Emerging Markets

https://doi.org/10.56249/ijbr.03.01.45