IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v50y2015i05p1135-1163_00.html
   My bibliography  Save this article

The Impact of Investability on Asset Valuation

Author

Listed:
  • Errunza, Vihang
  • Ta, Hai

Abstract

We develop an international asset pricing model to measure the impact of investability constraints on asset pricing. For a sample of 18 emerging markets, we use Standard & Poor’s investable weight factor (IWF) to show a 26.33% reduction in the cost of equity capital when non-investable firms become partially investable, with a further 12.51% reduction when partially investable firms become unrestricted. We demonstrate the generality and usefulness of the IWF by examining stocks with global/American depositary receipts and foreign institutional holdings as alternate investability proxies. Our results provide strong evidence of the economic benefits of market liberalization policies.

Suggested Citation

  • Errunza, Vihang & Ta, Hai, 2015. "The Impact of Investability on Asset Valuation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 50(5), pages 1135-1163, October.
    • Handle: RePEc:cup:jfinqa:v:50:y:2015:i:05:p:1135-1163_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S002210901500037X/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheng, Louis T.W. & Shen, Jianfu & Wojewodzki, Michal, 2023. "A cross-country analysis of corporate carbon performance: An international investment perspective," Research in International Business and Finance, Elsevier, vol. 64(C).
    2. David Hillier & Tiago Loncan, 2019. "Stock market integration, cost of equity capital, and corporate investment: Evidence from Brazil," European Financial Management, European Financial Management Association, vol. 25(1), pages 181-206, January.
    3. Liaqat Ali & Jianing Mi & Mussawar Shah & Sayed Jamal Shah & Salim khan & Kausar BiBi, 2017. "The Potential Socio-Economic Impact of China Pakistan Economic Corridor," Asian Development Policy Review, Asian Economic and Social Society, vol. 5(4), pages 191-198, December.
    4. Cai, Jun & Ho, Richard Y.K. & Zhang, Zheng, 2022. "Foreign investors, private information, and price discovery," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 506-525.
    5. Park, Na Young, 2020. "Trust and trusting behavior in financial institutions: Evidence from South Korea," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 408-419.
    6. Francis, Bill B. & Hunter, Delroy M. & Kelly, Patrick J., 2020. "Do foreign investors insulate firms from local shocks? Evidence from the response of investable firms to monetary policy," Journal of Empirical Finance, Elsevier, vol. 58(C), pages 386-411.
    7. Na Young Park, 2017. "Where Will the ‘Silver Money’ Go?," European Financial Management, European Financial Management Association, vol. 23(3), pages 459-474, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:50:y:2015:i:05:p:1135-1163_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.