Calculating Cost of Equity for EM countries

Again from Adrian Buckley's Multinational Finance pp 481.

Cost of Equity = Comparable Domestic Return + Country Risk Premium

Country Risk Premium = Default Spread for EM Country X (Std Dev. for EM equity market/ Std Dev. for EM government bonds.)

Default Spread = EM government bonds yields - Comparable Domestic government bonds.

This is the spread between the emerging market government bond yields and a comparable domestic bond i.e. US Treasury Bond.