Abstract

This paper examines how cultural values influence risk premium across the world. Cultural values are measured by four cultural indexes, power distance, uncertainty avoidance index, masculinity index, and individualism index, established by Geert Hofstede. Our methodology determines the risk premium by using the Dividend Discount Model, and then computes the regression analysis of each index's impact on average risk premiums. After analyzing 31 countries, results show the only statistically significant correlation found was between the individualism index and risk premium. The higher the individualistic nature of the culture was the higher the risk premium. This is attributed to the overconfidence and self-attribution biases found in investors with high individualism index.

Notes

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Thesis Completion

2012

Semester

Spring

Advisor

Sweo, Robert

Degree

Bachelor of Science in Business Administration (B.S.B.A.)

College

College of Business Administration

Degree Program

Finance

Subjects

Business Administration -- Dissertations, Academic;Dissertations, Academic -- Business Administration

Format

PDF

Identifier

CFH0004198

Language

English

Access Status

Open Access

Length of Campus-only Access

None

Document Type

Honors in the Major Thesis

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Included in

Finance Commons

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