Do Implicit Barriers Matter for Globalization?

60 Pages Posted: 2 Mar 2010 Last revised: 1 Oct 2010

See all articles by Francesca Carrieri

Francesca Carrieri

McGill University - Desautels Faculty of Management

Ines Chaieb

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Multiple version iconThere are 3 versions of this paper

Date Written: September 29, 2010

Abstract

Market liberalization may not result in global pricing or full market integration if implicit barriers are important. We use the conditional version of the Errunza and Losq (1985) model to estimate pricing of investable indices for 22 emerging markets and test this proposition. Our results show that local factors are priced and the implicit barriers are significantly associated with the integration measure. Specifically, better institutions, stronger corporate governance and more transparent markets would jointly contribute to a higher degree of integration by about 30 percent.

Keywords: International Asset Pricing, Emerging Markets, Market Integration, Liberalization, Globalization

JEL Classification: G15, F30, G30

Suggested Citation

Carrieri, Francesca and Chaieb, Ines and Errunza, Vihang R., Do Implicit Barriers Matter for Globalization? (September 29, 2010). Available at SSRN: https://ssrn.com/abstract=1560504 or http://dx.doi.org/10.2139/ssrn.1560504

Francesca Carrieri

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
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Ines Chaieb (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

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Switzerland
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Swiss Finance Institute

c/o University of Geneva
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Switzerland

Vihang R. Errunza

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-4056 (Phone)
514-398-3876 (Fax)

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