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Asset Pricing in a Segmented Emerging Market

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  • Dongwei Su

Abstract

This paper investigates the effect of market segmentation on stock prices and returns in emerging Chinese markets. Under the assumption of infinite investment horizon and representative consumer, I formulate an Intertemporal Capital Asset Pricing Model (ICAPM) with restrictions on share ownership. The model posits that cross-section variations in the average excess returns between domestic A -and foreign B- shares depend on systematic risks as measured by shares' own market betas and betas with respect to the international equity markets. After correcting for errors-in-variable problem, I obtain econometric results consistent with the empirical predictions of ICAPM.

Suggested Citation

  • Dongwei Su, 2000. "Asset Pricing in a Segmented Emerging Market," Journal of Applied Economics, Taylor & Francis Journals, vol. 3(2), pages 387-412, November.
    • Handle: RePEc:taf:recsxx:v:3:y:2000:i:2:p:387-412
    DOI: 10.1080/15140326.2000.12040555
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    Cited by:

    1. Eric Girardin & Zhenya Liu, 2003. "The Chinese Stock Market: A Casino with 'Buffer Zones'?," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 1(1), pages 57-70.

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