Ownership Concentration, Institutions and Expected Stock Returns
55 Pages Posted: 18 Feb 2014
Date Written: February 15, 2014
This study introduces a new asset pricing factor to capture both the effects of concentrated ownership and institutional development in 61 international equity markets. The evidence suggests the new measure offers significant improvements over the size and book-to-market value three factor model of Fama and French (1993), and to a lesser extent over the two factor liquidity augmented model of Liu (2006), in capturing the cross section of average stock returns. The findings emphasise the importance of institutional quality, legal origin and concentrated ownership that are the basis of property rights protection in the portfolio diversification decisions of minority investors.
Keywords: Investor Protection, Legal Origin, Asset pricing, International Financial Markets
JEL Classification: G11, G12, G15, O55
Suggested Citation: Suggested Citation