Legal regime, size, and liquidity factors in asset pricing
Legal regime, size, and liquidity factors in asset pricing
This study introduces a new legal regime factor into the international valuation literature which exploits the differences between civil and common law origin countries. This builds directly on the concept that institutions both build and shape culture and economic outcomes and takes account of the pervasive differences between civil and common law countries worldwide La Porta et al (1998, 2002). This study contrasts the abilities of three prominent liquidity constructs, namely Amihud (2002) price-impact, Liu (2006) trading speed and volume-based turnover, in explaining the total trading costs in a sample of 62 equity markets spanning developed and developing countries as well as aggregated worldwide civil and common law universes. The evidence reveals that differences in legal origin of markets exert a pervasive effect on the liquidity generating process that transcends institutions across markets. Furthermore a world market universe is created from the constituent stocks of the top tier equity market indices from 60 countries worldwide leading to the construction of size and liquidity returns-based factors and a new legal regime factor. The results indicate that the four-factor legal regime CAPM outperform both other pricing models
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Phylaktis, Kate
170c442f-ce62-4e4d-b244-dc64002b65c7
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
2 June 2010
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Phylaktis, Kate
170c442f-ce62-4e4d-b244-dc64002b65c7
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Hearn, Bruce, Phylaktis, Kate and Piesse, Jenifer
(2010)
Legal regime, size, and liquidity factors in asset pricing.
In 8th INFINITI Conference on International Finance annual meeting, Dublin, Ireland.
80 pp
.
Record type:
Conference or Workshop Item
(Paper)
Abstract
This study introduces a new legal regime factor into the international valuation literature which exploits the differences between civil and common law origin countries. This builds directly on the concept that institutions both build and shape culture and economic outcomes and takes account of the pervasive differences between civil and common law countries worldwide La Porta et al (1998, 2002). This study contrasts the abilities of three prominent liquidity constructs, namely Amihud (2002) price-impact, Liu (2006) trading speed and volume-based turnover, in explaining the total trading costs in a sample of 62 equity markets spanning developed and developing countries as well as aggregated worldwide civil and common law universes. The evidence reveals that differences in legal origin of markets exert a pervasive effect on the liquidity generating process that transcends institutions across markets. Furthermore a world market universe is created from the constituent stocks of the top tier equity market indices from 60 countries worldwide leading to the construction of size and liquidity returns-based factors and a new legal regime factor. The results indicate that the four-factor legal regime CAPM outperform both other pricing models
Text
WORLD Legal Regime BH
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Published date: 2 June 2010
Venue - Dates:
8th INFINITI Conference on International Finance, Trinity College Dublin, Dublin, Ireland, 2010-06-01 - 2010-06-04
Identifiers
Local EPrints ID: 423403
URI: http://eprints.soton.ac.uk/id/eprint/423403
PURE UUID: e6177718-780d-4f9d-a96f-b8532c8ccd85
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Date deposited: 21 Sep 2018 16:30
Last modified: 16 Mar 2024 04:37
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Contributors
Author:
Kate Phylaktis
Author:
Jenifer Piesse
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