Why Does Stock Market Volatility Differ Across Countries? Evidence from Thirty-Seven International Markets

Abstract

There are substantial differences in stock market volatility across countries. This paper asks why market volatility differs across countries. Using Datastream Country Indexes covering thirty seven international markets, this paper finds that the education level of investors plays a significant role in explaining cross-country market volatility differences. In addition, there is some evidence indicating that market industry concentration, the relative size of the stock market, and the number of firms listed may also be of significant explanatory power to cross-sectional market volatility differences. These findings can help predict international market volatility.

Keywords: Stock market volatility, International stock markets, Determinants of market volatility

JEL Classification: G15, E44