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Financial Development and Stock Returns: A Cross-Country Analysis

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  • Dellas, Harris
  • Hess, Martin

Abstract

We examine stock returns in a cross section of emerging and mature markets (47countries) between 1980-99. The level of financial development turns out to be an important determinant of the performance of stock returns. In general, a deeper and higher quality banking system decreases the volatility of stock returns. It also contributes to a greater synchronization in the movements of domestic and world returns and the same obtains when the stock market is liquid.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3681.

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Date of creation: Jan 2002
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Handle: RePEc:cpr:ceprdp:3681

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Keywords: financial development; stock returns;

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Citations

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Cited by:
  1. Dennis P. Quinn & Hans-Joachim Voth, 2008. "A Century of Global Equity Market Correlations," American Economic Review, American Economic Association, vol. 98(2), pages 535-40, May.
  2. Beine, Michel & Cosma, Antonio & Vermeulen, Robert, 2010. "The dark side of global integration: Increasing tail dependence," Journal of Banking & Finance, Elsevier, vol. 34(1), pages 184-192, January.
  3. Christian Aubin & Jean-Pierre Berdot & Daniel Goyeau & Jacques Léonard, 2005. "Quelle convergence financière pour les pecos ?. Une analyse économétrique de l'évolution des marchés d'actions (1998-2003)," Revue économique, Presses de Sciences-Po, vol. 56(1), pages 147-169.
  4. Dibeh, Ghassan, 2007. "Contagion effects in a chartist–fundamentalist model with time delays," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 382(1), pages 52-57.
  5. repec:ecu:wpaper:2010-01 is not listed on IDEAS
  6. Michel Beine & Bertrand Candelon, 2007. "Liberalization and Stock Market Co-Movement between Emerging Economies," CESifo Working Paper Series 2131, CESifo Group Munich.
  7. Balázs Égert & Evžen Kočenda, 2011. "Time-varying synchronization of European stock markets," Empirical Economics, Springer, vol. 40(2), pages 393-407, April.
  8. Donadelli, Michael & Paradiso, Antonio, 2014. "Does financial integration affect real exchange rate volatility and cross-country equity market returns correlation?," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 206-220.
  9. Antzoulatos, Angelos A. & Tsoumas, Chris, 2010. "Financial development and household portfolios - Evidence from Spain, the U.K. and the U.S," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 300-314, March.
  10. Uluc Aysun & Melanie Guldi, 2008. "Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure," Working papers 2008-06, University of Connecticut, Department of Economics, revised Oct 2008.
  11. Pengfei Wang & Yi Wen, 2013. "Financial development and long-run volatility trends," Working Papers 2013-003, Federal Reserve Bank of St. Louis.
  12. Quinn, Dennis & Voth, Hans-Joachim, 2008. "Free Flows, Limited Diversification: Explaining the Fall and Rise of Stock Market Correlations, 1890-2001," CEPR Discussion Papers 7013, C.E.P.R. Discussion Papers.
  13. Kim, Suk-Joong & Wu, Eliza, 2008. "Sovereign credit ratings, capital flows and financial sector development in emerging markets," Emerging Markets Review, Elsevier, vol. 9(1), pages 17-39, March.
  14. Ye Bai & Christopher Green, 2011. "Determinants of cross-sectional stock return variations in emerging markets," Empirical Economics, Springer, vol. 41(1), pages 81-102, August.

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