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Equity prices and financial globalization

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  • Jinjarak, Yothin

Abstract

This paper examines the association between equity returns, economic shocks, and economic integration. The empirical findings show that oil prices and U.S. Federal Reserve funds rates are associated with negative responses of international equity returns, of which a simple asset-pricing model is capable of explaining the international differences. Using vector autoregressions, we find that the effects of global economic shocks operate through the current excess returns of equity prices. Empirically, trade integration increases the responses of international equity returns to oil prices, while finance integration increases the responses of equity returns to Federal Reserve funds rates across countries.

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  • Jinjarak, Yothin, 2014. "Equity prices and financial globalization," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 49-57.
  • Handle: RePEc:eee:finana:v:33:y:2014:i:c:p:49-57
    DOI: 10.1016/j.irfa.2013.08.009
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    More about this item

    Keywords

    Asset prices; Economic integration; Monetary policy; Oil prices;
    All these keywords.

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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