Spatial Linkages in International Financial Markets
AbstractSpatial dependency has been broadly studied in several research areas, such as environmental criminology, economic geography, environmental sciences, and urban economics. However, it has been essentially overlooked in other subfields of economics and in the field of finance as a whole. A key element at stake is the definition of contiguity. In the context of financial markets, defining a metric distance is not a simple matter. In this article, we explore the notion of spatial dependency in a panel of 126 Latin American firms from Brazil, Chile, and Mexico over the period 1997-2006. Firstly, we formulate a spatial version of the capital asset pricing model (S-CAPM), which accounts for alternative measures of distance between firms, such as market capitalization, the market-to-book, enterprise value-to-EBITDA, and the debt ratios. Secondly, we analyze the potential existence of spatial linkages in investment and dividend decisions. We conclude that there may be contemporaneous linkages in firms’ decisions of such ratios, which may be indicative of some strategic behavior.
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Bibliographic InfoPaper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp234.
Date of creation: 29 Nov 2007
Date of revision:
Other versions of this item:
- Viviana Fernandez, 2011. "Spatial linkages in international financial markets," Quantitative Finance, Taylor & Francis Journals, vol. 11(2), pages 237-245.
- NEP-ALL-2007-12-08 (All new papers)
- NEP-GEO-2007-12-08 (Economic Geography)
- NEP-URE-2007-12-08 (Urban & Real Estate Economics)
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