Stock Market Liberalizations and the Repricing of Systematic Risk / Anusha Chari, Peter Blair Henry.

Format:

Book

Author/Creator:

Chari, Anusha.

Contributor:

National Bureau of Economic Research.

Henry, Peter Blair.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8265.

NBER working paper series no. w8265

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

When countries open their stock markets to foreign investors, firms that become eligible for purchase by foreigners (investible) are repriced according to the difference in the covariance of their returns with the local and world market. An investible firm whose return covariance with the local market exceeds that with the world market by 0.01 will experience a firm-specific revaluation of 3.4 percent. In contrast, the repricing of firms that remain off limits to foreign investors (non-investible) bears no significant relationship to differences in local and world covariances. These findings suggest that the CAPM has predictive power for the cross-sectional repricing of systematic risk when barriers to capital movements are removed.

Notes:

Print version record

May 2001.