59 Pages Posted: 23 Nov 2012 Last revised: 1 Dec 2016
Date Written: November 25, 2016
We study market segmentation effects with a sample of U.S. railroads that list their bonds in London in the 1873-1913 period. This sample provides a unique setting in which to analyze cross-listing effects because of the cost of capital estimation precision offered by bond yields, the geography-specific nature of railroad assets and the substantial economic and technological change during the examined period. The estimated U.S.-U.K. market segmentation premium declines from 27 bp in the 1870s to effectively zero by the early 1900s. The segmentation is greater for railroads from remote areas in the U.S., but regional differences diminish over time.
Keywords: : Economic geography; Global risk sharing; Market integration; Stock exchanges
JEL Classification: F36, G15, G30, O16
Suggested Citation: Suggested Citation
Chambers, David and Sarkissian, Sergei and Schill, Michael J., Market and Regional Segmentation and Risk Premia in the First Era of Financial Globalization (November 25, 2016). Darden Business School Working Paper No. 2179088. Available at SSRN: https://ssrn.com/abstract=2179088 or http://dx.doi.org/10.2139/ssrn.2179088