Market and Regional Segmentation and Risk Premia in the First Era of Financial Globalization

59 Pages Posted: 23 Nov 2012 Last revised: 1 Dec 2016

David Chambers

University of Cambridge - Judge Business School, Department of Finance & Accounting

Sergei Sarkissian

McGill University; Yerevan State University

Michael J. Schill

University of Virginia ­ Darden School of Business

Date Written: November 25, 2016

Abstract

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

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

David Chambers (Contact Author)

University of Cambridge - Judge Business School, Department of Finance & Accounting ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
44 (0)1223 339700 (Phone)

Sergei Sarkissian

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

Yerevan State University

1 Alex Manoogian Street
Yerevan, 0025
Armenia

Michael J. Schill

University of Virginia ­ Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm

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