Insead, Fontainebleau, France. This paper is based on the first chapter of my dissertation submitted at the Graduate School of Business, Stanford University. I want to express my sincerest thanks to my dissertation committee, Michael Gibbons, Bruce Grundy, and Allan Kleidon, for their invaluable comments throughout this dissertation research. I also want to thank Bengt Holmström, Bob Litzenberger, Paul Pfleiderer, Kristian Rydqvist, Myron Scholes, and Eric Terry for their help.
Asset Pricing in Partially Segmented Markets: Evidence from the Finnish Market
Article first published online: 30 APR 2012
1989 The American Finance Association
The Journal of Finance
Volume 44, Issue 3, pages 697–718, July 1989
How to Cite
HIETALA, P. T. (1989), Asset Pricing in Partially Segmented Markets: Evidence from the Finnish Market. The Journal of Finance, 44: 697–718. doi: 10.1111/j.1540-6261.1989.tb04386.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This paper analyzes asset pricing in a partially segmented market where citizens of a small country are allowed to hold only their domestic securities, whereas the rest of the investors (“foreigners”) are essentially allowed to hold all securities. In this market setting it may occur that the citizens of the small country are willing to pay less for their domestic securities than are the foreign investors. The paper derives equilibrium required rates of return for different investors in this market setting which perfectly occurred in Finland and tests this equilibrium model using data from the Finnish stock market. Empirical results are consistent with the hypotheses derived from the model.