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Property rights and the cost of capital
Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO). Jönköping University, Jönköping International Business School, JIBS, Economics.
Jönköping University, Jönköping International Business School, JIBS, Center for Family Enterprise and Ownership (CeFEO). Jönköping University, Jönköping International Business School, JIBS, Economics.
2015 (English)In: European Journal of Law and Economics, ISSN 0929-1261, E-ISSN 1572-9990, Vol. 39, no 3, 523-537 p.Article in journal (Refereed) Published
Abstract [en]

In countries with more secure property rights, the cost of capital is lower, suggesting higher investment rates. Using data from 49 countries we extend the conventional capital-asset pricing model (CAPM) to include a property rights risk-factor. In the conventional CAPM model only a single risk factor—systemic risk—is considered. However, when using a world market portfolio to estimate systemic risk in national portfolios, little of the required rate of return is explained in less developed as compared to more developed countries. Adding a factor representing institutional risk increases predictive power substantially. Further, we find that property rights affect the transmission of information, which suggests that markets price information differently, and allocate resources less efficiently, in countries with less secure property rights. We find that the CAPM model performs better in countries with more secure property rights.

Place, publisher, year, edition, pages
2015. Vol. 39, no 3, 523-537 p.
Keyword [en]
Asset pricing, International financial markets, Property rights, Cost of capital, Investment
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hj:diva-20441DOI: 10.1007/s10657-013-9396-xISI: 000354219500004Scopus ID: 2-s2.0-84876667655OAI: oai:DiVA.org:hj-20441DiVA: diva2:600474
Available from: 2013-01-24 Created: 2013-01-24 Last updated: 2015-10-08Bibliographically approved

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Bjuggren, Per-OlofEklund, Johan E.
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf