Financial Markets and Genetic Variation
Texas Tech University
University of California, Riverside (UCR) - Department of Finance and Management Science
University of Arizona
May 1, 2015
It is well documented that there is substantial variation in the level of financial development across countries. In this paper, we investigate the extent to which a deep-rooted characteristic – a country’s genetic variation – contributes to the variation in financial markets across countries. Extending the argument put forth by Ashraf and Galor (2013), we predict a hump-shaped relation between genetic variation and financial market size at the county level. Using data from almost 100 countries, our cross-sectional analysis reveals results that are consistent with our prediction, specifically for equities markets. Our results are robust to the inclusion of several controls for factors that have been previously shown to impact financial markets across countries, as well as the inclusion of several country-level cultural dimensions.
Number of Pages in PDF File: 54
Keywords: financial development, genetic diversity
JEL Classification: G1, G2, O1, O4, O5
Date posted: March 16, 2014 ; Last revised: May 4, 2015
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