TY  - JOUR
AU  - Chari,Anusha
AU  - Henry,Peter Blair
TI  - Risk Sharing and Asset Prices: Evidence From a Natural Experiment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8988
PY  - 2002
Y2  - June 2002
UR  - http://www.nber.org/papers/w8988
L1  - http://www.nber.org/papers/w8988.pdf
N1  - Author contact info:
Anusha Chari
301 Gardner Hall
CB#3305, Department of Economics
University of North Carolina at Chapel Hill
Chapel Hill, NC 27599
Tel: 919/966-5346
E-Mail: achari@unc.edu

Peter Blair Henry
Stern School of Business
New York University
44 West 4th Street, 11-58
New York, NY 10012
Tel: 212/998-0909
E-Mail: pbhenry@stern.nyu.edu
AB  - When countries liberalize their stock markets, firms that become eligible for purchase by foreigners (investible), experience an average stock price revaluation of 10.4 percent.  Since the covariance of the median investible firm's stock return with the local market is 30 times larger than its covariance with the world market, liberalization reduces the systematic risk associated with holding investible securities.  Consistent with this fact: 1) the average effect of the reduction in systematic risk is 3.4 percentage points, or roughly one third of the total effect; and 2) variation in the firm-specific response is directly proportional to the firm-specific change in systematic risk.  The statistical significance of this proportionality persists after controlling for changes in expected future profits and index inclusion criteria such as size and liquidity.
ER  -