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Foreign Ownership Restrictions and Equity price Premiums: Explaining the High Cost of International Diversification

  • Bailey, W.
  • Peter, C.Y.
  • Jun-Koo, K.
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    Companies in many countries have designated shares restricted to locals and otherwise identical unrestricted shares available to foreigners. With the ever-increasing demand for international portfolio investments, these foreign ownership restrictions typically lead to large price premiums for unrestricted shares relative to otherwise identical restricted shares. The price premiums are a substantial additional cost to foreign portfolio investment. Using data from eleven countries with binding foreign ownership limits, we explore the relative pricing of restricted and unrestricted shares with a variety of concepts from the finance literature.

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    Paper provided by The A. Gary Anderson Graduate School of Management. University of California Riverside in its series The A. Gary Anderson Graduate School of Management with number 97-10.

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    Length: 53 pages
    Date of creation: 1997
    Date of revision:
    Handle: RePEc:fth:caland:97-10
    Contact details of provider: Postal: The A. Gary Anderson Graduate School of Management. University of California, Riverside. Riverside CA 92521
    Web page: http://www.agsm.ucr.edu/

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