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International Asset Pricing under Mild Segmentation: Theory and Test
Author(s) -
ERRUNZA VIHANG,
LOSQ ETIENNE
Publication year - 1985
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1985.tb04939.x
Subject(s) - capital asset pricing model , context (archaeology) , portfolio , financial economics , segmentation , market segmentation , investment (military) , investment portfolio , capital market , economics , empirical research , portfolio investment , investment theory , test (biology) , business , econometrics , microeconomics , computer science , finance , artificial intelligence , mathematics , paleontology , statistics , politics , political science , law , biology
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.