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

56 Pages Posted: 23 Nov 2012 Last revised: 21 Dec 2017

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: October 16, 2017

Abstract

We study market segmentation effects using data on U.S. railroads that list their bonds in New York and London between 1873 and 1913. This sample provides a unique setting for such analysis because of the precision offered by bond yields in cost of capital estimation, the geography-specific nature of railroad assets, and ongoing substantial technological change. We document a significant reduction in market segmentation over time. While New York bond yields exceeded those in London in the 1870s, this premium disappeared by the early 1900s. However, the segmentation premium persisted in the more remote regions of the United States.

Keywords: Cross-listing; Economic geography; 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 (October 16, 2017). 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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