Globalization and Asset Prices

Abstract:     
We investigate whether the globalization process of the last thirty years has lead to “convergence” of asset prices in a wide set of countries, encompassing both developed and emerging markets. We examine several measures of convergence for interest rates (real and nominal) and bond and equity returns, and important fundamentals as inflation and earnings growth rates. While doing so, we extensively review the extant literature. Our results do not indicate strong effects of globalization on the convergence of asset prices, even though we document some links. In particular, financial openness matters relatively more than measures of corporate governance and political risk.

Number of Pages in PDF File: 97

Keywords: globalization, market integration, asset prices, corporate governance, convergence, comovements, return correlations, diversification, trend test, factor model

JEL Classification: F36, F21, E44, G12

working papers series