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Financial globalization and stock market risk

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  • Esqueda, Omar A.
  • Assefa, Tibebe A.
  • Mollick, André Varella

Abstract

This paper examines stock market volatility measured by either “beta-volatility” or by the standard deviation of stock returns over 1995–2007. In our dynamic panel data framework, after controlling for size, turnover, and real output growth, we find some support to increases in financial integration reducing total stock return volatility for representative emerging markets, with almost no impact for industrial economies. Allowing for feedback effects from stock volatility to stock turnover, we obtain a richer interpretation for the broadening of investor basis hypothesis: more integrated financial markets leads to lower stock volatility, yet these are not so strong as found previously and are not accompanied by more turnover.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 22 (2012)
Issue (Month): 1 ()
Pages: 87-102

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Handle: RePEc:eee:intfin:v:22:y:2012:i:1:p:87-102

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Web page: http://www.elsevier.com/locate/intfin

Related research

Keywords: Country risk; Dynamic panels; Global stock markets; International financial integration; Stock volatility;

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References

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