[2008년 제 1차] Can investor heterogeneity be useful in explaining
작성자 : 관리자
조회수 : 1030
게시일 :
2008-02-25
This paper examines whether investor heterogeneity can be useful in explaining the cross-section of average stock returns in emerging markets. We pose this question, since the lack of transparency and greater uncertainty, typical of those markets, make it more likely for investors to disagree with each other and hold different portfolios, leading to imperfect risk-sharing and the mean-variance inefficient market portfolio. Based on this notion, we consider using investor heterogeneity in the form of a two-factor model in which the domestic market portfolio is augmented by a factor-mimicking portfolio representing the premium associated with the limited risk-sharing due to investor heterogeneity. We test this two-factor model in the Korean stock market where the measures of heterogeneity such as foreign ownership and institutional holdings are available on a large number of stocks over a long period of time. We find that the two-factor model outperforms the CAPM one-factor and the Fama-French three-factor models. Consistent with investor heterogeneity being more severe in emerging markets, a developed market with comparable data availability, namely, Japan, shows a similar but weaker test result.