LAUSR

Abstract This paper undertakes a comparison between five multifactor variants of the capital asset pricing model. These include additional factors based on size, book to market value, momentum, liquidity and a new investor protection metric based on the product of institutional quality in a country and the proportion of free float shares, which captures the impact of controlling block holders. Using monthly returns of 909 blue chip firms from 18 Middle East & North African equity markets for 16 years, we show that a two factor CAPM augmented with a factor mimicking portfolio based on the investor protection metric yields the highest explanatory power. Analysis of Kalman filter time varying investor protection betas reveals investor protection premiums in Egypt, Iraq, Lebanon and Tunisia and corresponding discounts in Israel, Saudi Arabia, Kuwait, Oman, Dubai and Abu Dhabi