The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements?

72 Pages Posted: 17 Nov 1999 Last revised: 3 Oct 2013

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Wayne Yu

City University of Hong Kong

Bernard Yin Yeung

National University of Singapore - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: July 17, 1999

Abstract

Stock prices move together more in low-income economies than in high-income economies. This finding is clearly not due to market size differences, and is only partially explained by slightly higher fundamentals correlation in low-income economies. However, measures of a country?s institutionalized respect for property rights do appear to explain these differences. We conjecture that weak private property rights impede informed trading and increase systematic noise trader risk. We also conjecture that, in countries that protect public investors poorly from corporate insiders, intercorporate income shifting may make firm-specific information less useful to risk arbitrageurs and therefore impede its capitalization into stock prices. Although our tests support these conjectures to some extent, we invite other explanations of our main finding.

JEL Classification: G12, G14

Suggested Citation

Morck, Randall K. and Yu, Wayne and Yeung, Bernard Yin, The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements? (July 17, 1999). Journal of Financial Economics (JFE), Vol. 58, No. 1-2, 2000; William Davidson Institute Working Paper No. 44; Harvard Institute of Economics Research Paper No. 1879. Available at SSRN: https://ssrn.com/abstract=194530 or http://dx.doi.org/10.2139/ssrn.194530

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Wayne Yu

City University of Hong Kong ( email )

Kowloon
Hong Kong

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
1,948
Abstract Views
6,860
rank
7,629
PlumX Metrics