The Cost of Insecure Property Rights: R2 Revisited
In the conventional CAPM model only a single risk factor is considered. However, using a world market portfolio to estimate systematic risk in national portfolios little of the required rate of return is explained in developing as compared to developed countries. Adding a factor representing institutional risk the predictive power increases substantially. By stressing importance of property and investor rights in this fashion, we add to the research on international differences in R2 initiated by Morck et al. (2000). Our findings are consistent with the hypothesis that stock price synchronicy depends on the institutional quality.
|Date of creation:||06 Sep 2011|
|Date of revision:|
|Contact details of provider:|| Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden|
Phone: 08-441 59 00
Fax: 08-441 59 29
Web page: http://www.ratio.se/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:hhs:ratioi:0174. 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: (Martin Korpi)
If references are entirely missing, you can add them using this form.