Country Risk Premium as an Indicator of Investment Attractiveness and the Russian-Ukrainian War Effect

Abstract

One of the significant areas of financial management is investment management. To assess the investment attractiveness of a country, a sufficient number of different indicators are known, which is determined by the complexity of the concept under consideration. The assessment can be made on the basis of long-term statistics, e.g., of attracted foreign capital. It is also possible to use a composition of several statistical data reflecting different aspects related to investments. Considering the problem, along with the above approaches, it would like to have an indicator that would reflect the current state of the investment process, that is, based on short-term (day, week, month) data. It should not be composite, so as not to introduce additional error into the calculation. This article is devoted to the presentation of just such an indicator for investment attractiveness of a country, called the Country Risk Premium, CRP, which is well-known in business valuation. The article describes experience in calculating the СRP for different countries. The influence of the Russian-Ukrainian War on the magnitude of this indicator is demonstrated. The article is intended for financial consultants, appraisers, teachers, and scientists in the fields of finance, investment and valuation, as well as for specialists in related fields of economics.