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Does trade regionalism increase stock market segmentation within a trading bloc?

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  • Chee Wooi Hooy

Abstract

Whether trade regionalism remains a stumbling block to economic globalization remains a debatable issue. This paper investigates the impact of trade regionalism on stock market segmentation for the case of AFTA, EU and NAFTA. We exploit the pricing error of the trading-bloc capital asset pricing model (TB-CAPM) as an indicator for stock market segmentation based on Akdogan (1992) and Adler and Qi (2003). We use intra-trade ratio as the indicator for trade regionalism. Controlling for other determinants for market integration, evidence is found that trade regionalism helps to explain stock market segmentation in EU and NAFTA, which are both dominated by developed countries. For NAFTA, the higher the intra-trade ratio the lower the degree of market segmentation within the trading bloc. For EU however, the intra-trade ratio contributes to higher stock market segmentation.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 22 (2008)
Issue (Month): 1 ()
Pages: 113-126

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Handle: RePEc:taf:intecj:v:22:y:2008:i:1:p:113-126

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Related research

Keywords: stock market segmentation; trade regionalism; TB-CAPM; intra-trade ratio;

References

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