Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-18T23:09:12.646Z Has data issue: false hasContentIssue false
  • English
  • Français

An International Market Model of Security Price Behavior

Published online by Cambridge University Press:  19 October 2009

Bruno H. Solnik
Get access Rights & Permissions [Opens in a new window]

Extract

The Markowitz-Sharpe market model has been extensively applied to the study of price behavior of American common stocks. In this paper an international market model will be used assuming that the return on any security is a linear function of the return on the world market portfolio. A justification for this approach lies in the International Asset Pricing Model (IAPM) proposed by Solnik [14] and [15]. This market model is by no means the only stochastic process of security returns consistent with the IAPM, but it is the most simple and straightforward extension of the traditional approach to domestic markets.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 9 , Issue 4 , September 1974 , pp. 537 - 554
Copyright
Copyright © School of Business Administration, University of Washington 1974

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Adler, M., and Horesh, R.. “The Relationship among Equity Markets: Comment.” Forthcoming, Journal of Finance.Google Scholar
[2]Agmon, T. “The Relations among Equity Markets: A Study of Share Price Comovements in the United States, United Kingdom, Germany and Japan.” Journal of Finance, September 1972.Google Scholar
[3]Black, F., Jensen, M., and Scholes, N.. “The Capital Asset Pricing Model: Some Empirical Tests.” In Studies in the Theory of Capital Markets, edited by Jensen, M.. Praeger, 1972.Google Scholar
[4]Blume, M. “The Assessment of Portfolio Performance.” Ph.D. diss., University of Chicago, 1968.Google Scholar
[5]Fama, E. “Risk, Return and Equilibrium: Some Clarifying Comments.” Journal of Finance, March 1968, pp. 29–40.CrossRefGoogle Scholar
[6]Grubel, H.G. “Internationally Diversified Portfolios: Welfare Gains and Capital Flows.” American Economic Review, December 1968, pp. 1299–1314.Google Scholar
[7]Lee, C.H. “A Stock Adjustment Analysis of Capital Movements: The United States-Canadian Case.” Journal of Political Economy, July/August 1969.CrossRefGoogle Scholar
[8]Malinvaud, E.Statistical Methods of Econometrics, 2nd ed.North Holland Publishers, 1970.Google Scholar
[9]Miller, M.H., and Scholes, M.. “Rates of Return in Relation to Risk: A Reexamination of Some Recent Findings.” In Studies in the Theory of Capital Markets, edited by Jensen, M.. Praeger, 1972.Google Scholar
[10]Miller, N.C., and Whitman, M.V.N.. “A Mean-Variance Analysis of United States Longterm Portfolio Foreign Investment.” Quarterly Journal of Economics, May 1971.Google Scholar
[11]Modigliani, F.; Pogue, G.A.; Scholes, M.S.; and Solnik, B.H.. “Efficiency of European Capital Markets and Comparison with the American Market.”Proceedings of the 1st International Congress on Stock Exchanges,Milan, 1972.Google Scholar
[12]Sharpe, W.F. “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.” Journal of Finance, September 1964, pp. 425–442.Google Scholar
[13]Portfolio Theory and Capital Markets. McGraw-Hill, 1970.Google Scholar
[14]Solnik, B.H. “European Capital Markets: Towards a Theory of an International Capital Market.” Ph.D. diss., MIT, August 1972.Google Scholar
[15]Solnik, B.H. “An Equilibrium Model of the International Capital Market.” GSB Research Paper, Stanford University, September 1972.Google Scholar
[16]Solnik, B.H. “The Relationship among Equity Markets: Comment.” Forthcoming, Journal of Finance.Google Scholar