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Stock Return, Risk, and Legal Environment around the World

In: Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes

Author

Listed:
  • Paul W. Chiou
  • Alice C. Lee
  • Cheng Few Lee

Abstract

This chapter shows how the legal environment in a country influences performance and risk of stock across countries at different developmental stages and of various rules of jurisdiction. Using data of 4,916 stocks from 37 countries, our empirical findings confirm that equities in countries with English common-law origin have higher risk premiums than those in civil-law countries, particularly for countries of the French/Spanish code. The indicators representing high efficiency in law system, low corruption, strong legal protection of investors’ rights, and reliable political environment are associated with low risk and high performance. The various elements of legal procedural formalism, however, have differing effects on volatility and return.

Suggested Citation

  • Paul W. Chiou & Alice C. Lee & Cheng Few Lee, 2024. "Stock Return, Risk, and Legal Environment around the World," World Scientific Book Chapters, in: Cheng Few Lee & Alice C Lee & John C Lee (ed.), Handbook of Investment Analysis, Portfolio Management, and Financial Derivatives In 4 Volumes, chapter 24, pages 821-846, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811269943_0024
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    Keywords

    Financial Accounting; Financial Auditing; Mutual Funds; Hedge Funds; Asset Pricing; Options; Portfolio Analysis; Risk Management; Investment Analysis; Momentum Analysis; Behavior Analysis; Futures; Index Futures; CDCs; Financial Econometrics; Statistics; Financial Derivatives; Financial Accounting;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G1 - Financial Economics - - General Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G3 - Financial Economics - - Corporate Finance and Governance

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