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Financial Development and the Sensitivity of Stock Markets to External Influences

  • Dellas, Harris
  • Hess, Martin

We investigate how the relative contribution of external factors to stock price movements varies with the degree of financial development. We find that financial development makes stock markets more susceptible to external influences (both financial and macroeconomic). Interestingly, this effect is present even after having accounted for capital controls and international trade effects.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2766.

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Date of creation: Apr 2001
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Handle: RePEc:cpr:ceprdp:2766
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  1. Ammer, John & Mei, Jianping, 1996. " Measuring International Economic Linkages with Stock Market Data," Journal of Finance, American Finance Association, vol. 51(5), pages 1743-63, December.
  2. Nicolas A. Cuche & Martin K. Hess, 1999. "Estimating Monthly GDP In A General Kalman Filter Framework: Evidence From Switzerland," Working Papers 99.02, Swiss National Bank, Study Center Gerzensee.
  3. Reinhart, Carmen & Montiel, Peter, 1999. "Do capital controls influence the volume and composition of capital flows? Evidence from the 1990s," MPRA Paper 13710, University Library of Munich, Germany.
  4. Campbell R. Harvey, 1994. "Predictable Risk and Returns in Emerging Markets," NBER Working Papers 4621, National Bureau of Economic Research, Inc.
  5. Geert Bekaert & Campbell R. Harvey, 1994. "Time-Varying World Market Integration," NBER Working Papers 4843, National Bureau of Economic Research, Inc.
  6. Helpman, Elhanan & Razin, Assaf, 1978. "A theory of international trade under uncertainty," MPRA Paper 22112, University Library of Munich, Germany.
  7. Razin, A. & Sadka, E. & Yuen, C.W., 1997. "Implications of the Home Bias: A Pecking Order of Capital Inflows and Corrective Taxation," Papers 32-97, Tel Aviv.
  8. Canova, Fabio & Dellas, Harris, 1993. "Trade interdependence and the international business cycle," Journal of International Economics, Elsevier, vol. 34(1-2), pages 23-47, February.
  9. K. Geert Rouwenhorst, 1999. "Local Return Factors and Turnover in Emerging Stock Markets," Journal of Finance, American Finance Association, vol. 54(4), pages 1439-1464, 08.
  10. Geert Bekaert & Campbell R. Harvey, 1995. "Emerging Equity Market Volatility," NBER Working Papers 5307, National Bureau of Economic Research, Inc.
  11. Natalia T. Tamirisa, 1999. "Exchange and Capital Controls as Barriers to Trade," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 4.
  12. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-75, November.
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