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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.

Suggested Citation

  • Dellas, Harris & Hess, Martin, 2002. "Financial Development and Stock Returns: A Cross-Country Analysis," CEPR Discussion Papers 3681, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3681
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    More about this item

    Keywords

    financial development; stock returns;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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