Unrestricted.2016-11-142011-02-182016-11-142004-05http://hdl.handle.net/2346/9704The last two decades have seen rapid growth in investment in emerging stock markets due to the attraction of their potential for very high returns and substantial diversification benefits. While the opportunities to invest in these markets have expanded substantially, foreign investors continue to face considerable barriers to investment in emerging stock markets. One restriction that has received little attention in the literature is the limitation on the amount of a particular security that foreign investors may own. This dissertation examines the impact of this barrier on characteristics of emerging market stock returns by considering stocks' investability, which is the degree to which a security is realistically accessible to foreign investors. The effect of investability on returns, variance of returns, skewness of returns and kurtosis of returns is considered. A significant relationship is found between investability and each of the first four moments of stock returns and in each case the relationship is found to be nonlinear, being best described by either a quadratic or cubic function with respect to investability. It is found that securities with lower investability, and therefore less available to foreign investors, tend to have higher returns and lower variances. Low investability securities also tend to have slightly higher skewness and kurtosis of returns. Correlations between securities returns and returns on their market index tend to be lower for low investability when aggregate country investability is examined, but lower for low investability when mean security investability is considered. Emerging market security returns are shown to have very low correlation with returns on a world market index but it is found that this correlation is lower for lower investability securities, being almost zero for noninvestable securities. These findings suggest that emerging market securities are not a homogeneous group but that returns characteristics vary by the degree of investability. Results indicate that the most desirable securities (those with the highest returns, lowest risk as measured by variance and greatest diversification benefits) are those that are not available to foreign investors.application/pdfengSecuritiesDeveloping countries -- Economic aspectsStock exchangesMarket segmentationForeignCapitalists and financiersInvestmentsDissertation