This paper investigates the downside risk model developed by Ang et al. (2006) for stocks around the world. Using firm-level daily stock return data from 37 countries, this paper presents three findings. First, the local downside risk is independently priced in many countries and is economically important with a global average premium as 9.43% annually. Evidences from the regional subgroups show that global downside risk also embeds in the equity price worldwide. Second, local downside risk premium commoves with the global average downside risk premiums. Third, local downside risk is more significantly priced in countries with higher political risk, higher trading costs and smaller foreign institutional ownership, suggesting countries more segmented from the world are more subject to lo...[ Read more ]

This paper investigates the downside risk model developed by Ang et al. (2006) for stocks around the world. Using firm-level daily stock return data from 37 countries, this paper presents three findings. First, the local downside risk is independently priced in many countries and is economically important with a global average premium as 9.43% annually. Evidences from the regional subgroups show that global downside risk also embeds in the equity price worldwide. Second, local downside risk premium commoves with the global average downside risk premiums. Third, local downside risk is more significantly priced in countries with higher political risk, higher trading costs and smaller foreign institutional ownership, suggesting countries more segmented from the world are more subject to local downside shocks.