Hostname: page-component-cd9895bd7-dzt6s Total loading time: 0 Render date: 2024-12-25T07:23:04.781Z Has data issue: false hasContentIssue false
  • English
  • Français

Investment in Developed and Less Developed Countries

Published online by Cambridge University Press:  06 April 2009

Vihang R. Errunza  and
Barr Rosenberg
Get access Rights & Permissions [Opens in a new window]

Extract

A number of studies have compared the investment risk of various industries and of various individual corporations in developed countries (DCs). The purpose of this paper is to compare investment risk in DCs with less developed countries (LDCs). The variance of returns to investment in common stocks provides a natural measure of investment risk and will be used in this study. Studies in LDCs include work of Levy and Sarnat [12], [13]. Errunza [3], [4], and Lessard [11]. Levy and Sarnat and Errunza found low economy-wide investment risk on an average for LDCs (relative to DCs), with stock indices being used as surrogates for economy-wide risk. These results are not unambiguous, however, because there are probable difficulties due to infrequent trading and averaging in the broad market indices used in the above studies. Hence, we use a sample of the largest corporations that suffer little, if at all, from thin trading and/or averaging.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 17 , Issue 5 , December 1982 , pp. 741 - 762
Copyright
Copyright © School of Business Administration, University of Washington 1982

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Cootner, P. “Stock Prices: Random vs. Systematic Changes.” In The Random Character of Stock Market Prices, Cootner, Paul H., ed. Cambridge, MA: MIT Press (1964), pp. 231–252.Google Scholar
[2]Durand, D. “Growth Stocks and the Petersburg Paradox.” Journal of Finance, Vol. 12 (09 1957), pp. 348–363.Google Scholar
[3]Errunza, V. “Gains from Portfolio Diversification into Less Developed Countries' Securities.” Journal of International Business Studies, Vol. 8 (Fall/Winter 1977), pp. 83–99.CrossRefGoogle Scholar
[4]Errunza, V. “Efficiency and the Programs to Develop Capital Markets– –The Brazilian Experience.” Journal of Banking and Finance, Vol. 3 (1979), pp. 355–382.CrossRefGoogle Scholar
[5]Fama, E. “The Behavior of Stock Market Prices.” Journal of Business, Vol. 38 (01 1965), pp. 34–105.CrossRefGoogle Scholar
[6]Fama, E. “Tomorrow on the New York Stock Exchange.” Journal of Business, Vol. 38 (07 1965), pp. 285–299.CrossRefGoogle Scholar
[7]Fama, E. “Risk Return and Equilibrium: Some Clarifying Comments.” Journal of Finance, Vol. 23 (03 1968), pp. 29–40.CrossRefGoogle Scholar
[8]Fama, E. “Risk Return and Equilibrium.” Journal of Political Economy, Vol. 79 [01–02 1971), pp. 30–35.CrossRefGoogle Scholar
[9]Hamada, R. “The Effect of the Firm's Capital Structure on the Systematic Risk of Common Stocks.” Journal of Finance, Vol. 27 (1972), pp. 435–452.CrossRefGoogle Scholar
[10]Leff, N. “Capital Markets in the Less Developed Countries: The Group Principle.” In Money and Finance in Economic Growth and Development, McKinnon, R., ed. New York: Marcel Dekker, Inc. (1975), pp. 97–122.Google Scholar
[11]Lessard, D. “International Portfolio Diversification: A Multivariate Analysis for a Group of Latin American Countries.” Journal of Finance, Vol. 28 (06 1973), pp. 619–633.CrossRefGoogle Scholar
[12]Levy, H., and Sarnat, M.. “International Diversification of Investment Portfolios.” American Economic Review, Vol. 60 (09 1970), pp. 668–675.Google Scholar
[13]Levy, H., and Sarnat, M.. “Devaluation Risk and the Portfolio Analysis of International Investment.” In International Capital Markets, Elton, E. and Gruber, M., eds. New York: John Wiley and Sons, Inc. (1975), pp. 177–206.Google Scholar
[14]Macau, lay F.Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856. New York: National Bureau of Economic Research (1938).Google Scholar
[15]Markowitz, H.Portfolio Selection: Efficient Diversification of Investments. New York: John Wiley and Sons, Inc. (1959).Google Scholar
[16]Rosenberg, B. “Statistical Analysis of Price Series Obscured by Averaging Measures.” Journal of Financial and Quantitative Analysis, Vol. 6 (09 1971), pp. 1083–1094.CrossRefGoogle Scholar
[17]Rosenberg, B., and Marathe, V.. “The Prediction of Investment Risk: Systematic and Residual Risk.” Proceedings of the Seminar on the Analysis of Security Prices, University of Chicago (11 1975).Google Scholar
[18]Sharpe, W. “A Simplified Model for Portfolio Analysis.” Management Science, Vol. 9 (01 1963), pp. 277–293.CrossRefGoogle Scholar
[19]Sharpe, W. “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.” Journal of Finance, Vol. 19 (09 1964), pp. 425–442.Google Scholar
[20]Strachan, H. “The Role of the Business Groups in Economic Development––The Case of Nicaragua.” D.B.A. dissertation, Harvard Graduate School of Business Administration (1971).Google Scholar
[21]Solnik, B. “An Equi1ibrium Model of the International Capital Market.” Jovamal of Economic Theory, Vol. 8 (08 1974), pp. 500–524.CrossRefGoogle Scholar
[22]Solnik, B. “Testing International Asset Pricing: Some Pessimistic Views.” Journal of Finance, Vol. 32 (05 1977), pp. 503–512.CrossRefGoogle Scholar