The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements?
Journal of Financial Economics (JFE), Vol. 58, No. 1, 2000
University of Alberta School of Business Research Paper No. 2013-619
Posted: 7 Jun 2013
There are 2 versions of this paper
The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements?
Date Written: April 6, 1999
Abstract
Stock prices move together more in poor economies than in rich economies. This finding is not due to market size and is only partially explained by higher fundamentals correlation in low-income economies. However, measures of property rights do explain this difference. The systematic component of returns variation is large in emerging markets, and appears unrelated to fundamentals co-movement, consistent with noise trader risk. Among developed economy stock markets, higher firm-specific returns variation is associated with stronger public investor property rights. We propose that strong property rights promote informed arbitrage, which capitalizes detailed firm-specific information.
Keywords: Asset pricing, Information and market efficiency, Event studies, International financial markets, Financial economics
JEL Classification: G12, G14, G15, G38, N20
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