Abstract

http://ssrn.com/abstract=2315649
 


 



Culture and R2


Cheol S. Eun


Georgia Institute of Technology - Finance Area

Lingling Wang


Tulane University - Finance & Economics

Steven Chong Xiao


Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

April 23, 2014

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
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


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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
Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )
Janice H. Levin Bldg., Room 121
94 Rockafeller Road
Piscataway, NJ 08854-8054
United States
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