MARKET SEGMENTATION AND NOISE TRADER RISK

Vihang Errunza, Ked Hogan and Mao-Wei Hung ()
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Vihang Errunza: McGill University, Montreal, Canada
Ked Hogan: Barclays Global Investors, San Francisco, USA
Mao-Wei Hung: Department of International Business, College of Management, National Taiwan University, No. 1, Section 4, Roosevelt Road, Taipei, Taiwan, R.O.C.

International Journal of Theoretical and Applied Finance (IJTAF), 2000, vol. 03, issue 01, 85-100

Abstract: A simple asset pricing model is developed to take into account two important characteristics in global investments: market segmentation and noise trader risk. Our results show the removal of international investment barriers and cross-border listings have not led to a fully integrated international capital market. We also show that different degree of investor rationality across borders induces an additional component of risk premium which is related to the "noise spill-over effect".

Keywords: Asset pricing; market segmentation; noise trader (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1142/S021902490000005X

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