Do Implicit Barriers Matter for Globalization?

64 Pages Posted: 23 Dec 2010 Last revised: 14 Jun 2013

Francesca Carrieri

McGill University - Desautels Faculty of Management

Ines Chaieb

University of Geneva and Swiss Finance Institute; Swiss Finance Institute

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Multiple version iconThere are 3 versions of this paper

Date Written: August 2011

Abstract

Market liberalization may not result in global pricing or full market integration if implicit barriers
are important. We test this proposition for 22 emerging markets using the conditional version of
Errunza and Losq (1985) model. We estimate and compare the degree of integration for stocks
that are eligible for purchase by foreigners (investible) and those that are not (non-investible).
Our results show that local factors are priced for both segments 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 15-20 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? (August 2011). Swiss Finance Institute Research Paper No. 10-55. Available at SSRN: https://ssrn.com/abstract=1730206 or http://dx.doi.org/10.2139/ssrn.1730206

Francesca Carrieri

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-1582 (Phone)
514-398-3876 (Fax)

Ines Chaieb (Contact Author)

University of Geneva and Swiss Finance Institute ( email )

Geneva Finance Research Institute
UniMail, 40 Bd Pont d'Arve
Geneva, CH - 1211
Switzerland
+41223798568 (Phone)

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
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)

Register to save articles to
your library

Register

Paper statistics

Downloads
187
rank
77,413
Abstract Views
1,389
PlumX