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Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets

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  • Gultekin, Mustafa N
  • Gultekin, N Bulent
  • Penati, Alessandro

Abstract

This paper focuses on two countries, Japan and the United States, to test the integration of capital markets. In Japan, the enactment of the Foreign Exchange and Foreign Trade Control Law in December of 1980 amounted to a true regime switch that virtually eliminated capital controls. Using multifactor asset pricing models, the authors show that the price of risk in the U.S. and Japanese stock markets was different before, but not after, the liberalization. This evidence supports the view that governments are the source of international capital market segmentation. Copyright 1989 by American Finance Association.

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  • Gultekin, Mustafa N & Gultekin, N Bulent & Penati, Alessandro, 1989. " Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets," Journal of Finance, American Finance Association, vol. 44(4), pages 849-869, September.
  • Handle: RePEc:bla:jfinan:v:44:y:1989:i:4:p:849-69
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