This dissertation consists of three essays. The first essay explores the underlying economic forces that drive the variation in risk premia around the world. It examines whether and how differences in the investors' information environment affect cross-country differences in the volatility of equity risk premia. We use the variance-decomposition approach and implied cost of capital method to estimate time variation in risk premia for 40 developed and developing countries worldwide. Consistent with theoretical predictions, countries with better information environments tend to experience a lower risk premium volatility, even after controlling for various country variables that are previously found to be good predictors of risk premia. Our further analysis of an exogenous event, specifically the 1997 Asian financial crisis, corroborates our finding that a country's information environment plays an important role in explaining the volatility of its market risk premium.

163 p.