The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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International Asset Pricing under Mild Segmentation: Theory and Test
Published: 03/01/1985 | DOI: 10.1111/j.1540-6261.1985.tb04939.x
VIHANG ERRUNZA, ETIENNE LOSQ
This paper conducts a theoretical and empirical investigation of the pricing (and portfolio) implications of investment barriers in the context of international capital markets. The postulated market structure—labelled “mildly segmented”—leads to the existence of “super” risk premiums for a subset of securities and to a breakdown of the standard separation result. The empirical study uses an extended data base including LDC markets and provides tentative support for the mild segmentation hypothesis.
Capital Flow Controls, International Asset Pricing, and Investors' Welfare: A Multi‐Country Framework
Published: 09/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb02636.x
VIHANG ERRUNZA, ETIENNE LOSQ
This paper investigates the impact of capital flow restrictions on the pricing of securities, on the optimal portfolio composition for investors of different nationalities, and on their welfare. Under capital flow controls, the equilibrium price of a security is determined jointly by its international and national risk premiums, and investors acquire nationality‐specific portfolios along with a market‐wide proxy for the world market portfolio. Removal of investment barriers generally leads to an increase in the aggregate market value of the affected securities, and all investors favor a move toward market integration. Introduction of different types of index funds in the world market generally increases world market integration and investor welfare.