The Effect of Equity Barriers on Foreign Investment in Developing Countries / Stijn Claessens, Moon-Whoan Rhee.

Format:

Book

Author/Creator:

Claessens, Stijn.

Contributor:

National Bureau of Economic Research.

Rhee, Moon-Whoan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4579.

NBER working paper series no. w4579

Language:

English

Subjects (All):

Capital movements.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1993.

Cambridge, Massachusetts : National Bureau of Economic Research, 1993.

Summary:

This paper investigates stock performance in emerging markets in relation to their accessibility by foreign investors (as measured by the investability index of the IFC). Using the Stehle (1977) model, we reject for most markets integration and fail to reject for all segmentation. We find that there is a positive relationship between a stock's P/E-ratio and its investability index for most emerging markets, suggesting that barriers to access by foreigners have a negative impact. For four markets, this result is robust to the inclusion of the world beta and the degree of international spanning of the domestic market. A significant negative relationship between the investability index and stock return is only found for Jordan. This is likely because the effects of changes in the degree of access over time confound the cross-sectional relationship between return and investability indexes.

Notes:

Print version record

December 1993.