International asset pricing under segmentation and PPP deviations |
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Authors: | Ines Chaieb Vihang Errunza |
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Affiliation: | 1. University of Amsterdam, 11 Roetersstraat, Amsterdam 1018 WB, The Netherlands;2. McGill University, 1001 Sherbrooke Street West, Montreal, Qc, Canada H3A 1G5 |
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Abstract: | We analyze the impact of both purchasing power parity (PPP) deviations and market segmentation on asset pricing and investor's portfolio holdings. The freely traded securities command a world market risk premium and an inflation risk premium. The securities that can be held by only a subset of investors command two additional premiums: a conditional market risk premium and a segflation risk premium. Our model is empirically supported with important implications for tests of international asset pricing. |
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Keywords: | G11 G12 G15 F31 |
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