Weltwirtschaftliches Archiv

, Volume 130, Issue 4, pp 730–746 | Cite as

The effect of foreign ownership restrictions on stock price dynamics

  • G. Geoffrey Booth
  • Mustafa Chowdhury
  • Teppo Martikainen
Articles

Abstract

The Effect of Foreign Ownership Restrictions on Stock Price Dynamics. —This paper uses Finnish data to explore the impact of foreign ownership restrictions on the dynamic properties of domestic stock prices. These restrictions create unrestricted stocks (foreign and domestic ownership) and restricted stocks (domestic ownership). Unrestricted share prices are significantly more volatile than those of restricted shares but their means are not significantly different from each other. The returns on the two types of shares are found to be generated by an error correction model. These results support the hypothesis that the unrestricted share prices tend to overshoot relative to equilibrium with the arrival of new information.

G12 G18 

Zusammenfassung

Die Auswirkung von Beschränkungen ausländischer Beteiligungen auf die Dynamik der Aktienkurse. —Die Verfasser benutzen finnische Daten, um die Auswirkungen von Beschränkungen ausländischer Beteiligungen auf die dynamischen Eigenschaften heimischer Aktienkurse zu untersuchen. Aufgrund der Maßnahmen, die ausländische Beteiligungen einschränken, gibt es unbeschränkte Aktien (in ausländischem und inländischem Eigentum) und beschränkte Aktien (in inländischem Eigentum). Die Kurse unbeschränkter Aktien haben signifikant größere Ausschläge als die Kurse beschränkter Aktien, aber die Mittelwerte weichen nicht signifikant voneinander ab. Die Renditen beider Aktientypen scheinen offensichtlich von einem Fehlerkorrekturmodell hervorgebracht worden zu sein. Die Ergebnisse stützen die Hypothese, daß die Kurse im Fall des unbeschränkten Aktienbesitzes dahin tendieren, bei neuen Informationen den neuen Gleichgewichts wert zu überschießen.

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Copyright information

© Institut fur Weltwirtschaft an der Universitat Kiel 1994

Authors and Affiliations

  • G. Geoffrey Booth
  • Mustafa Chowdhury
  • Teppo Martikainen

There are no affiliations available

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