The Journal of Finance

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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Search results: 6.

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.


Debt‐for‐Equity Swaps under a Rational Expectations Equilibrium

Published: 07/01/1989   |   DOI: 10.1111/j.1540-6261.1989.tb04384.x

VIHANG R. ERRUNZA, ARTHUR F. MOREAU

This paper analyzes LDC debt‐for‐equity swaps under a rational expectations equilibrium. Under full information, the swap can never be strictly preferred by the LDC, the MNC, and the bank. Under the postulated informational asymmetry assumptions the same results obtain, leading to the “lemons” market in reverse. Under rational expectations, the swap can only occur if the loan is correctly valued relative to all private information in the economy. Given that some swaps do occur, future models must reflect the unique features of swaps.


International Corporate Diversification, Market Valuation, and Size–Adjusted Evidence

Published: 07/01/1984   |   DOI: 10.1111/j.1540-6261.1984.tb03663.x

VIHANG R. ERRUNZA, LEMMA W. SENBET


The Effects of International Operations on the Market Value of the Firm: Theory and Evidence

Published: 05/01/1981   |   DOI: 10.1111/j.1540-6261.1981.tb00455.x

VIHANG R. ERRUNZA, LEMMA W. SENBET


Can the Gains from International Diversification Be Achieved without Trading Abroad?

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00182

Vihang Errunza, Ked Hogan, Mao‐Wei Hung

We examine whether portfolios of domestically traded securities can mimic foreign indices so that investment in assets that trade only abroad is not necessary to exhaust the gains from international diversification. We use monthly data from 1976 to 1993 for seven developed and nine emerging markets. Return correlations, mean‐variance spanning, and Sharpe ratio test results provide strong evidence that gains beyond those attainable through home‐made diversification have become statistically and economically insignificant. Finally, we show that the incremental gains from international diversification beyond home‐made diversification portfolios have diminished over time in a way consistent with changes in investment barriers.