What Segments Equity Markets?
Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)
Campbell R. Harvey
Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)
Christian T. Lundblad
University of North Carolina Kenan-Flagler Business School
University of Washington - Michael G. Foster School of Business
CEPR Discussion Paper No. DP8142
We propose a new, valuation-based measure of world equity market segmentation. While we observe decreased levels of segmentation in many developing countries, the level of segmentation is still significant. In contrast to previous research, we characterize the factors that account for variation in market segmentation both through time as well as across countries. While a country's regulation with respect to foreign capital flows is important in determining its level of segmentation, we find that non-regulatory factors are also related to the cross-sectional and time-series variation in the level of segmentation. We identify a country's political risk profile and its stock market development as two additional local segmentation factors as well as the U.S. corporate credit spread as a global segmentation factor.
Number of Pages in PDF File: 60
Keywords: capital controls, earnings yield, financial development, financial openness, globalization, market integration, political risk, quality of institutions, valuation differentials
JEL Classification: F00, F15, F21, F3, F43working papers series
Date posted: December 27, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 2.344 seconds