Firm-Specific Variation and Openness in Emerging Markets
34 Pages Posted: 24 Nov 2003
Date Written: October 2003
This paper compares the comovement of individual stock returns across emerging markets. Campbell et al. (2001) and Morck et al. (2000) show that the US in the post war period saw rising firm specific stock return variations and thus declining comovement. We detect a similar, albeit weaker, pattern in most, but not all, emerging markets. We further find that higher firm-specific variation is associated with greater capital market openness, but not goods market openness. Moreover, this relationship is magnified by institutional integrity (good government). Goods market openness is associated with higher market-wide variation.
JEL Classification: G1, F21, F36, O19
Suggested Citation: Suggested Citation