Culture and R2

Cheol S. Eun

Georgia Institute of Technology - Finance Area

Lingling Wang

Tulane University - Finance & Economics

Steven Chong Xiao

Georgia Institute of Technology

April 23, 2014

Journal of Financial Economics (JFE), Forthcoming

Consistent with predictions from the psychology literature, we find that stock prices co-move more (less) in culturally tight (loose) and collectivistic (individualistic) countries. Culture influences stock price synchronicity by affecting correlations in investors’ trading activities and a country’s information environment. Both market-wide and firm-specific variations are lower in tighter cultures. Individualism is mostly associated with higher firm-specific variations. Trade and financial openness weakens the effect of domestic culture on stock price comovements. These results hold for various robustness checks. Our study suggests that culture is an important omitted variable in the literature that investigates cross-country differences in stock price comovements.

Number of Pages in PDF File: 47

Keywords: stock price synchronicity, culture, tightness, individualism, openness

JEL Classification: G15, G12, G02

Accepted Paper Series

Download This Paper

Date posted: August 25, 2013 ; Last revised: April 26, 2014

Suggested Citation

Eun, Cheol S. and Wang, Lingling and Xiao, Steven Chong, Culture and R2 (April 23, 2014). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2315649 or http://dx.doi.org/10.2139/ssrn.2315649

Contact Information

Cheol S. Eun
Georgia Institute of Technology - Finance Area ( email )
755 Ferst Drive
Atlanta, GA 30332
United States
Lingling Wang (Contact Author)
Tulane University - Finance & Economics ( email )
A.B. Freeman School of Business
7 McAlister Drive
New Orleans, LA 70118
United States
Steven Chong Xiao
Georgia Institute of Technology ( email )
800 West Peachtree St NW
Scheller College of Business, Georgia Tech
Atlanta, GA 30308
United States
404-385-2413 (Phone)
Feedback to SSRN

Paper statistics
Abstract Views: 540
Downloads: 173
Download Rank: 100,240
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.610 seconds