Argentina's equity risk around the Milei reforms: a diagnostic decomposition of sovereign, liquidity, behavioral, and institutional premia

Purpose This study aims to examine how Argentina's required equity returns evolved across four policy regimes between 2015 and 2025, with particular attention to the Milei reform period. Using the Frontier Market Valuation Instrument it decomposes the equity risk premium into sovereign, liquidity, behavioral, and institutional components. Design/methodology/approach Using quarterly data, the study derives sovereign risk from spreads and ratings, liquidity risk from turnover and market-depth indicators, behavioral risk from EGARCH-in-Mean estimates of USD excess-return volatility, and institutional risk from governance measures. The resulting decomposition is evaluated against valuation anchors, benchmarked against CAPM and CAPM plus country risk premium, and subjected to structural-break and sensitivity tests. Findings The results indicate substantial post-reform compression in sovereign risk and a modest improvement in liquidity, while behavioral risk remains episodically elevated and the institutional penalty has not yet declined. The aggregate premium falls from 17.31 percentage points in 2020–2023 to 14.77 percentage points in 2024–2025, pointing to a lower but still uneven cost of equity as markets price both reform credibility and execution risk. Relative to CAPM plus country risk premium, the full decomposition delivers comparable tracking performance while offering a clearer account of which risk channels moved and when. Practical implications For investors and policymakers, the evidence suggests that the early rerating of Argentine equities has been driven mainly by lower sovereign risk. More durable reductions in the cost of capital are likely to depend on deeper market liquidity, steadier policy communication, and stronger institutional credibility. Originality/value The study provides a transparent descriptive decomposition of Argentina's equity risk across the Milei reform cycle. Its contribution is diagnostic rather than predictive, showing which risk channels moved and when without claiming structural identification or superior forecast accuracy.