Journal Title
Title of Journal: Rev Quant Finan Acc
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Abbravation: Review of Quantitative Finance and Accounting
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Authors: Sema Bayraktar
Publish Date: 2008/04/01
Volume: 32, Issue: 2, Pages: 169-195
Abstract
This article derives international equity pricing relations by taking into account inflationary exchange risk under various forms of market segmentation/integration In a meanvariance framework a twocountry twoperiod twogoods model is analyzed under three different market structures segmented mildly segmented and integrated It is found that as long as investors are consuming imported goods in the presence of market frictions inflationary exchange risk is an important determinant of real equity prices This is the case because inflationary exchange rate affects the real purchasing power of investors
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