Download This PaperDo Implicit Barriers Matter for Globalization?
60 Pages Posted: 22 Oct 2010
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Do Implicit Barriers Matter for Globalization?
Do Implicit Barriers Matter for Globalization?
Date Written: September 21, 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
JEL Classification: G15, F30, G30
Suggested Citation: Suggested Citation
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
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