Stock Market Liberalizations and the Repricing of Systematic Risk

Anusha Chari and Peter Henry

No 8265, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When countries open their stock markets to foreign investors, firms that become eligible for purchase by foreigners (investible) are repriced according to the difference in the covariance of their returns with the local and world market. An investible firm whose return covariance with the local market exceeds that with the world market by 0.01 will experience a firm-specific revaluation of 3.4 percent. In contrast, the repricing of firms that remain off limits to foreign investors (non-investible) bears no significant relationship to differences in local and world covariances. These findings suggest that the CAPM has predictive power for the cross-sectional repricing of systematic risk when barriers to capital movements are removed.

JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2001-05
Note: AP IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published as Chari, Anusha and Peter Blair Henry. "Risk Sharing and Asset Prices: Evidence from a Natural Experiment." The Journal of Finance 59, 3 (June 2004): 1295-1324.

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Working Paper: Stock Market Liberalizations and the Repricing of Systematic Risk (2001)
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