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Market Segmentation And Noise Trader Risk

Author

Listed:
  • 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.)

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".

Suggested Citation

  • Vihang Errunza & Ked Hogan & Mao-Wei Hung, 2000. "Market Segmentation And Noise Trader Risk," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 3(01), pages 85-100.
    • Handle: RePEc:wsi:ijtafx:v:03:y:2000:i:01:n:s021902490000005x
    DOI: 10.1142/S021902490000005X
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    Cited by:

    1. Aggarwal, Reena & Dahiya, Sandeep & Klapper, Leora, 2005. "American Depositary Receipts (ADR) holdings of U.S. based emerging market funds," Policy Research Working Paper Series 3538, The World Bank.

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