Journal Article10.1111/J.1540-6261.1985.TB04939.X
International Asset Pricing under Mild Segmentation: Theory and Test
Vihang R. Errunza,Etienne Losq +1 more
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TL;DR: In this article, the authors conduct a theoretical and empirical investigation of the pricing and portfolio implications of investment barriers in the context of international capital markets and provide tentative support for the mild segmentation hypothesis.
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Abstract: This paper conducts a theoretical and empirical investigation of the pricing (and portfolio) implications of investment barriers in the context of international capital markets. The postulated market structure-labelled "mildly segmented"-leads to the existence of "super" risk premiums for a subset of securities and to a breakdown of the standard separation result. The empirical study uses an extended data base including LDC markets and provides tentative support for the mild segmentation hypothesis. THE QUESTION AS TO whether the international capital market is integrated or segmented appears particularly elusive. Indeed, the difficulties surrounding this important issue abound, as was made vividly clear by Solnik [20]. At the risk of tackling too ambitious a task, we undertake here to build a model and develop an empirical methodology to provide at least a partial answer to the
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Citations
Cointegration of International Stock Market Indices
TL;DR: In this article, the authors derived evidence on the integration of international stock markets from the cointegration properties of International stock market prices using multivariate co-integration test of Johansen, and found that the set of six country stock price indices, including that of the United States, Canada, United Kingdom, France, Germany, and Japan are cointegrated.
65
Are the China-related stock markets segmented with both world and regional stock markets?
Yuenan Wang,Amalia Di Iorio +1 more
TL;DR: In this paper, the authors investigated the integration of three China-related stock markets, namely, the A-, B- and H-share markets, with both the Hong Kong stock market and the world market.
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An International CAPM for Partially Integrated Markets: Theory and Empirical Evidence
TL;DR: In this article, a theoretical testable capital asset pricing model for partially segmented markets is proposed, where the authors establish that if some investors do not hold all international assets because of direct and/or indirect barriers, the traditional international CAPM must be augmented by a new factor reflecting the local risk undiversifiable internationally.
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Egalitarianism, Cultural Distance, and FDI: A New Approach
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Industry‐Specific Human Capital, Idiosyncratic Risk, and the Cross‐Section of Expected Stock Returns
TL;DR: This article showed that the cross-section of expected stock returns is primarily affected by industry-level rather than aggregate labor income risk, and when human capital is excluded from the asset pricing model, the resulting idiosyncratic risk may appear to be priced.
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References
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TL;DR: In this paper, a mathematical equivalence between the individual return/beta linearity relation and the market portfolio's mean-variance efficiency is discussed, which implies that every individual asset must be included in a correct test.
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A model of international asset pricing
TL;DR: In this article, an intertemporal model of international asset pricing is constructed which admits differences in consumption opportunity sets across countries, and it is shown that the real expected excess return on a risky asset is proportional to the covariance of the return of that asset with changes in the world real consumption rate.
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On the Effects of Barriers to International Investment
TL;DR: In this article, a simple model is presented in which it is costly for domestic investors to hold foreign assets and the implications of the model for the composition of optimal portfolios at home and abroad are derived.
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The Effects of International Operations on the Market Value of the Firm: Theory and Evidence
TL;DR: In this article, the authors investigate the existence of monopoly rents associated with international operations in a market-value theoretic framework and find that the benefits of international operations evolve from such factors as (1) imperfections in the product and factor markets, (2) differential international taxation, and (3) imperfection in the financial markets.
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