This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Are Financial Assets Priced Locally or Globally?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
G. Andrew Karolyi
Rene M. Stulz

Additional information is available for the following registered author(s):

Abstract

We review the international finance literature to assess the extent to which international factors affect financial asset demands and prices. International asset pricing models with mean-variance investors predict that an asset's risk premium depends on its covariance with the world market portfolio and, possibly, with exchange rate changes. The existing empirical evidence shows that a country's risk premium depends on its covariance with the world market portfolio and that there is some evidence that exchange rate risk affects expected returns. However, the theoretical asset pricing literature relying on mean-variance optimizing investors fails in explaining the portfolio holdings of investors, equity flows, and the time-varying properties of correlations across countries. The home bias has the effect of increasing local influences on asset prices, while equity flows and cross-country correlations increase global influences on asset prices.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w8994.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8994.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:nbr:nberwo:8994

Note: AP CF
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chan, Louis K C & Lakonishok, Josef, 1997. " Institutional Equity Trading Costs: NYSE versus Nasdaq," Journal of Finance, American Finance Association, vol. 52(2), pages 713-35, June. [Downloadable!] (restricted)
  2. Bohn, Henning & Tesar, Linda L, 1996. "U.S. Equity Investment in Foreign Markets: Portfolio Rebalancing or Return Chasing?," American Economic Review, American Economic Association, vol. 86(2), pages 77-81, May. [Downloadable!] (restricted)
  3. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September. [Downloadable!] (restricted)
  4. Bekaert, Geert & Hodrick, Robert J, 1992. " Characterizing Predictable Components in Excess Returns on Equity and Foreign Exchange Markets," Journal of Finance, American Finance Association, vol. 47(2), pages 467-509, June. [Downloadable!] (restricted)
    Other versions:
  5. Black, Fischer, 1990. " Equilibrium Exchange Rate Hedging," Journal of Finance, American Finance Association, vol. 45(3), pages 899-907, July. [Downloadable!] (restricted)
  6. Baxter, Marianne & Jermann, Urban J, 1997. "The International Diversification Puzzle Is Worse Than You Think," American Economic Review, American Economic Association, vol. 87(1), pages 170-80, March. [Downloadable!] (restricted)
    Other versions:
  7. Bekaert, Geert & Harvey, Campbell R. & Lumsdaine, Robin L., 2002. "Dating the integration of world equity markets," Journal of Financial Economics, Elsevier, vol. 65(2), pages 203-247, August. [Downloadable!] (restricted)
    Other versions:
  8. Bekaert, Geert & Harvey, Campbell R, 1995. " Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-44, June. [Downloadable!] (restricted)
    Other versions:
  9. Alan G. Ahearne & William L. Griever & Francis E. Warnock, 2000. "Information costs and home bias: an analysis of U.S. holdings of foreign equities," International Finance Discussion Papers 691, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  10. Campbell, John Y & Hamao, Yasushi, 1992. " Predictable Stock Returns in the United States and Japan: A Study of Long-Term Capital Market Integration," Journal of Finance, American Finance Association, vol. 47(1), pages 43-69, March. [Downloadable!] (restricted)
    Other versions:
  11. Hyuk Choe & Bong-Chan Kho & Rene M. Stulz, 2001. "Do Domestic Investors Have More Valuable Information About Individual Stocks Than Foreign Investors?," NBER Working Papers 8073, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. K.C. Chan & G. Andrew Karolyi & Rene M. Stulz, 1992. "Global Financial Markets and the Risk Premium on U.S. Equity," NBER Working Papers 4074, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Black, Fischer, 1974. "International capital market equilibrium with investment barriers," Journal of Financial Economics, Elsevier, vol. 1(4), pages 337-352, December. [Downloadable!] (restricted)
  14. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec.. [Downloadable!] (restricted)
  15. Bailey, Warren & Jagtiani, Julapa, 1994. "Foreign ownership restrictions and stock prices in the Thai capital market," Journal of Financial Economics, Elsevier, vol. 36(1), pages 57-87, August. [Downloadable!] (restricted)
  16. Calvo, Sara & Reinhart, Carmen, 1996. "Capital flows to Latin America : Is there evidence of contagion effects?," Policy Research Working Paper Series 1619, The World Bank. [Downloadable!]
    Other versions:
  17. Anusha Chari & Peter Blair Henry, 2001. "Stock Market Liberalizations and the Repricing of Systematic Risk," NBER Working Papers 8265, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June. [Downloadable!] (restricted)
  19. Bai, Jushan & Lumsdaine, Robin L & Stock, James H, 1998. "Testing for and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, Blackwell Publishing, vol. 65(3), pages 395-432, July. [Downloadable!] (restricted)
  20. Mark Britten-Jones, 1999. "The Sampling Error in Estimates of Mean-Variance Efficient Portfolio Weights," Journal of Finance, American Finance Association, vol. 54(2), pages 655-671, 04. [Downloadable!] (restricted)
  21. Chan, Louis K. C. & Lakonishok, Josef, 1993. "Institutional trades and intraday stock price behavior," Journal of Financial Economics, Elsevier, vol. 33(2), pages 173-199, April. [Downloadable!] (restricted)
  22. Kee-Hong Bae & G. Andrew Karolyi & René M. Stulz, 2003. "A New Approach to Measuring Financial Contagion," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 16(3), pages 717-763, July. [Downloadable!] (restricted)
    Other versions:
  23. Cho, D Chinhyung & Eun, Cheol S & Senbet, Lemma W, 1986. " International Arbitrage Pricing Theory: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 41(2), pages 313-29, June. [Downloadable!] (restricted)
  24. Bottazzi, Laura & Pesenti, Paolo & van Wincoop, Eric, 1996. "Wages, profits and the international portfolio puzzle," European Economic Review, Elsevier, vol. 40(2), pages 219-254, February. [Downloadable!] (restricted)
  25. Chan, Louis K C & Lakonishok, Josef, 1995. " The Behavior of Stock Prices around Institutional Trades," Journal of Finance, American Finance Association, vol. 50(4), pages 1147-74, September. [Downloadable!] (restricted)
  26. Geert Bekaert & Campbell R. Harvey, 2000. "Foreign Speculators and Emerging Equity Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 565-613, 04. [Downloadable!] (restricted)
    Other versions:
  27. Bekaert, G. & Harvey, C. R. & Lumsdaine, R. L., 2002. "The dynamics of emerging market equity flows," Journal of International Money and Finance, Elsevier, vol. 21(3), pages 295-350, June. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Statistics
Access and download statistics

Did you know? RePEc data is maintained by each archive holder on its own website. Nothing is held centrally.

This page was last updated on 2008-10-10.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.