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

Posted: 7 Jun 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

Bernard Yin Yeung

National University of Singapore - Business School

Wayne Yu

City University of Hong Kong

Multiple version iconThere are 2 versions of this paper

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

Suggested Citation

Morck, Randall K. and Yeung, Bernard Yin and Yu, Wayne, The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements? (April 6, 1999). Journal of Financial Economics (JFE), Vol. 58, No. 1, 2000; University of Alberta School of Business Research Paper No. 2013-619. Available at SSRN: https://ssrn.com/abstract=2275521

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

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)

Wayne Yu

City University of Hong Kong ( email )

Kowloon
Hong Kong

Register to save articles to
your library

Register

Paper statistics

Abstract Views
874
PlumX Metrics