Global Growth Opportunities and Market Integration

56 Pages Posted: 1 Jul 2004

See all articles by Geert Bekaert

Geert Bekaert

Columbia Business School - Finance and Economics

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School

Stephan Siegel

University of Washington - Michael G. Foster School of Business; CESifo

Multiple version iconThere are 2 versions of this paper

Date Written: June 2006

Abstract

We propose an exogenous measure of a country's growth opportunities by interacting the country's local industry mix with global price to earnings (PE) ratios. We find that these exogenous growth opportunities predict future changes in real GDP and investment in a large panel of countries. This relation is strongest in countries that have liberalized their capital accounts, equity markets, and banking systems. We also find that financial development, external finance dependence, and investor protection measures are much less important in aligning growth opportunities with growth than is capital market openness. Finally, we formulate new tests of market integration and segmentation by linking local and global PE ratios to relative economic growth.

Keywords: Growth Opportunities, Market Integration, Finance and Growth, Capital Allocation, Capital Account Openness, Financial Liberalization

JEL Classification: F30, F36, G15, O11, O57

Suggested Citation

Bekaert, Geert and Harvey, Campbell R. and Lundblad, Christian T. and Siegel, Stephan, Global Growth Opportunities and Market Integration (June 2006). EFA 2004 Maastricht Meetings Paper No. 1697. Available at SSRN: https://ssrn.com/abstract=559921 or http://dx.doi.org/10.2139/ssrn.559921

Geert Bekaert

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Campbell R. Harvey

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

Stephan Siegel (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://faculty.washington.edu/ss1110/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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