A Joint Test of Market Segmentation and Exchange Risk Factor in International Capital Market
Market segmentation and exchange risk are two main factors that distinguish international financing and investment decisions from domestic ones. Existing studies of market segmentation have been conducted within a framework in which exchange risk is not explicitly recognized. This paper performs a joint test of market segmentation and exchange risk pricing based on individual stock data from seven major countries, outside of the U.S., for the period January 1981 to December 1989. The theoretical framework used is a multifactor model with domestic and world market factors and an exchange risk factor. The maximum likelihood method is used to estimate risk premia, and factor analysis is used to provide additional evidence on the pricing of risk factors. The results indicate that (a) the factor structure of asset returns is internationally heterogeneous, (b) many national capital markets can be described as partially segmented, rather than the polar cases of complete segmentation or integration, and (c) exchange risk is a significant factor affecting asset returns in addition to the domestic and world market risk factors.© 1997 JIBS. Journal of International Business Studies (1997) 28, 29–49
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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.
Volume (Year): 28 (1997)
Issue (Month): 1 (March)
|Contact details of provider:|| Web page: http://www.palgrave-journals.com/|
|Order Information:|| Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK|
Web: http://www.palgrave-journals.com/pal/subscribe/index.html Email:
When requesting a correction, please mention this item's handle: RePEc:pal:jintbs:v:28:y:1997:i:1:p:29-49. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daniel Foley)
If references are entirely missing, you can add them using this form.