Stock return, risk, and legal environment around the world

Investor sentiment and its nonlinear effect on stock returns—New evidence from the Chinese stock market based on panel quantile regression model

“…Some researchers think that external environment is also influential. Chiou et al (2010) declare that legal development affects stock performance and excess returns. Chui et al (2008) propose that cultural factors may play different roles in behavioral biases between countries.…”

Country-specific idiosyncratic risk and global equity index returns

“…That is, country-specific volatilities are persistent. The literature on international equity pricing suggests that the undiversifiable country-specific risk may be due to factors such as purchasing power parity deviations, i.e., exchange rate and inflation risk (Adler & Dumas, 1983), government restrictions on capital movements in emerging markets (Henry, 2000), different developmental stages of legal environment and rules of jurisdiction (Chiou, Lee, & Lee, 2010), and asymmetric information across markets (Brennan & Cao, 1997). Since these country-specific risk factors are most likely related to policies adopted by individual countries, it is reasonable for uncertainty to be more persistent in these data, especially in the emerging markets (Lewis, 2011).…”

Underpricing of IPOs: Firm-, issue- and country-specific characteristics

“…Chiou et al (2010) examine 4916 stocks from 37 countries and find that stronger investor protection leads to a decrease in investment risk. A higher overall quality of the legal system and a better legal protection of investor's rights are associated with lower asset volatility and lower systematic risk, as well as with a higher risk-adjusted return as measured by the Sharpe and Treynor index.…”