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http://hdl.handle.net/2451/31394
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| Title: | Risk Sharing and Asset Prices: Evidence From a Natural Experiment |
| Authors: | Henry, Peter
Chari, Anusha |
| Issue Date: | 2005 |
| Abstract: | When countries liberalize their stock markets, firms that become
eligible for foreign purchase (investible), experience an average stock
price revaluation of 15.1 percent. Since the historical covariance of
the average investible firm’s stock return with the local market
is roughly 200 times larger than its historical covariance with the
world market, liberalization reduces the systematic risk associated with
holding investible securities. Consistent with this fact: (1) the
average effect of the reduction in systematic risk is 6.8 percentage
points, or roughly two fifths of the total revaluation; and (2) the
firm-specific revaluations are directly proportional to the
firm-specific changes in systematic risk. |
| URI: | http://hdl.handle.net/2451/31394 |
| Appears in Collections: | Peter Henry's Collection
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