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The Effects of International Intermarket Investment Barriers on Asset Pricing: The Case of the Singapore Stock Exchange

Mohamed Ariff and Walayet A. Khan
Quarterly Journal of Business and Economics
Vol. 37, No. 2 (Spring, 1998), pp. 17-31
Stable URL: http://www.jstor.org/stable/40473239
Page Count: 15
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Effects of International Intermarket Investment Barriers on Asset Pricing: The Case of the Singapore Stock Exchange
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Abstract

This paper examines the effect of unidirectional intermarket investment barriers on asset prices in the Singapore stock market. The results show that identical stocks trade at a significant price difference when legal restrictions on foreign holdings of indigenous equity are binding. Foreign investors are willing to offer a premium, and local investors demand a discount, for otherwise identical stocks. The results from a pooled regression show that the foreign ownership restrictions, relative liquidity, and the correlation between Singapore and world market portfolios explain significantly the cross-sectional variation in the daily price premiums.

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