Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets

Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese... ABSTRACT The paper focuses on two countries, Japan and the U.S., to test the integration of capital markets. In Japan, the enactment of the Foreign Exchange and Foreign Trade Control Law in December of 1980 amounted to a true regime switch that virtually eliminated capital controls. Using multifactor asset pricing models, we show that the price of risk in the U.S. and Japanese stock markets was different before, but not after, the liberalization. This evidence supports the view that governments are the source of international capital market segmentation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets

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Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1989.tb02627.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT The paper focuses on two countries, Japan and the U.S., to test the integration of capital markets. In Japan, the enactment of the Foreign Exchange and Foreign Trade Control Law in December of 1980 amounted to a true regime switch that virtually eliminated capital controls. Using multifactor asset pricing models, we show that the price of risk in the U.S. and Japanese stock markets was different before, but not after, the liberalization. This evidence supports the view that governments are the source of international capital market segmentation.

Journal

The Journal of FinanceWiley

Published: Sep 1, 1989

References

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