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Journal of Finance Vol. 44 No. 4 1989

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

Mustafa N. Gultekin; N. Bulent Gultekin; Alessandro Penati1,2,3

1 University of North Carolina at Chapel Hill · 2 Prime Minister's Office · 3 University of Pennsylvania

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.

DOI
10.1111/j.1540-6261.1989.tb02627.x
Volume
44
Issue
4
Pages
849-869
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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