Before participating in a stock market, investors compare it with others. In the literature three factors are often considered important for the comparison: stock returns, their associated risk, and cost of trading. Accordingly, in the forgoing we have studied three questions with regard to the seven major Latin American stock markets: (1) How different are the financial, economic, and political conditions of the LAEM from the developed markets and what are the investment laws in the LAEM? (2) What is the cost of trading in the LAEM; is it higher than in the developed stock markets? And (3) does the return determination process in the LAEM differ from those processes documented for the developed markets? The first and second questions were studied in the first part of this thesis (Chapters 2 and 3), while the third question was addressed in the second part (Chapters 4 and 5).


Stock Market Stock Return Trading Cost Portfolio Return Inside Trading 
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  1. 123.
    La Porta et al. (1998) developed an antidirector rights index. The difference between this index and the SH-Index is that the SH-Index additionally includes mandatory dividends and the percentage of capital to call an extraordinary shareholder meeting. By including these additional rights, the SH-Indexes of French-civil-law countries move closer to common-law countries. However, the differences are not important enough to have a significant impact on the IL-Index.Google Scholar
  2. 126.
    There are several reasons for taking this approach. Emerging market returns are influenced by local information (Harvey (1995)) since a significant number of barriers effectively segment the emerging markets from the global capital markets (Bekaert (1995)), and the purchasing power parity varies among the LAEM.Google Scholar
  3. 130.
    (1) All within group coefficients (intercepts) are lower (higher) than the coefficients obtained from the full sample; (2) in most cases the coefficients (intercepts) are so small (high) that they do not provide support for the model; and (3) the R2 within regressions are also lower (Berk (1997)).Google Scholar

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© Deutscher Universitäts-Verlag/GWV Fachverlage GmbH, Wiesbaden 2006

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