Political Crises and the Stock Market Integration of Emerging Markets
26 Pages Posted: 4 Dec 2010
Date Written: November 2, 2010
This paper investigates the role of political crises in explaining the change in the degree of stock market integration for emerging markets over the period 1991-2006. Using a unique database, the International Crisis Behavior database, which contains detailed information about political crises around the world, we assess whether political crises affect stock market integration for 19 emerging markets from Far East Asia, Latin America and Eastern Europe. We find that crises and their characteristics significantly reduce the level of stock market integration for these regions. In particular, the start of a political crisis, its severity, US involvement in the conflict and the number of actors involved in the crisis all have a significant impact on the level of stock market integration for the emerging markets in each region.
Keywords: Stock Market Integration, International Crises, Emerging Markets
JEL Classification: F36, G15
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