MARKET-SEGMENTATION AND STOCK-PRICES - EVIDENCE FROM AN EMERGING MARKET

We examine the relationship between stock prices and market segmentati on induced by ownership restrictions in Mexico. The focus is on multip le classes of equity that differentiate between foreign and domestic t raders, and between domestic individuals and institutions. Significant stock price premia are documented for shares not restricted to a part icular investor group. We analyze the theoretical and empirical determ inants of premia across firms and over time. In addition to economy-wi de factors, segmentation reflects the relative scarcity of unrestricte d shares. The results provide additional support for Stulz and Wasserf allen's (1995) hypothesis that firms discriminate between investor gro ups with different demand elasticities.