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What Segments Equity Markets?

Author Info

Listed author(s):
  • Geert Bekaert

    (Columbia University
    National Bureau of Economic Research)

  • Campbell R. Harvey

    (Duke University
    National Bureau of Economic Research)

  • Christian T. Lundblad

    (University of North Carolina)

  • Stephan Siegel

    (University of Washington)

Abstract

We propose a new, valuation-based measure of world equity market segmentation. While we observe decreased levels of segmentation in many developing countries, the level of segmentation is still significant. In contrast to previous research, we characterize the factors that account for variation in market segmentation both through time as well as across countries. While a country’s regulation with respect to foreign capital flows is important in determining its level of segmentation, we find that non-regulatory factors are also related to the cross-sectional and time-series variation in the level of segmentation. We identify a country’s political risk profile and its stock market development as two additional local segmentation factors as well as the U.S. corporate credit spread as a global segmentation factor.

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Paper provided by Narodowy Bank Polski, Economic Research Department in its series NBP Working Papers with number 76.

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Length: 54
Date of creation: 2010
Handle: RePEc:nbp:nbpmis:76
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Find related papers by JEL classification:
  • F00 - International Economics - - General - - - General
  • F15 - International Economics - - Trade - - - Economic Integration
  • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
  • F3 - International Economics - - International Finance
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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