Abstract
Objetives. Analyze how the political uncertainty affects the risk premium in the Brazilian market from January 1996 to December 2016. Methodology. This study adopting the econometric model proposed by Pastor and Veronesi (2013) to analyse five approaches to measure risk premium in Brazil, a country where is difficult to estimate a reliable historical premium because of the short and volatile histories. Findings. The study shows a positive and statistically significant relation between political uncertainty and risk premium. In addition, the results suggest that the Brazilian and the American market seem different perceptions about the effect of political uncertainty. Limitations. The limited size of our sample could be problem to conduct a more comprehensive statistical analysis. Originality/Value. The Political Uncertainty has recently received increased attention from the media and the academics. However, we contribute to this debate by empirically investigating the effect of policy uncertainty on five different approach of estimates risk premium in markets that are not mature.
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