Portfolio Valuation in the Presence of Market Frictions

Makram Bellalah ()
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Makram Bellalah: CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne

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Abstract: We develop a simple model of international asset pricing in the presence of shadow costs of incomplete information. Our model suggests that the exchange rate risk is priced in an international context. Incomplete information explains in part the wellknown home bias equity. Information costs are defined in the spirit of Merton (1987) model of capital market equilibrium with incomplete information. The model supports the empirical findings in Kang and Stulz (1997) and Dahlquist and Robertsson (2000).

Date: 2009
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Published in International Journal of Business, 2009, 14 (2), pp.137-150

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03688729

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