The Determinants of Cross-country Stock Market Correlation PDF Download
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Author: Paweena Prasatkitjaroen
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 84
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Author: Paweena Prasatkitjaroen
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 84
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Author: Alexis Anagnostopoulos
Publisher:
ISBN:
Category : Assets (Accounting)
Languages : en
Pages : 34
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Book Description
We establish a link between two recent trends: (i) the rise in cross-country stock market correlations over the past three decades, and (ii) the increase in foreign direct investment (FDI) positions over the same period. We document the presence of these phenomena, both for the US versus developed economies, as well as for bilateral pairs of six developed economies with major stock markets, and show that the relation between FDI and stock market correlations survives controlling for other relevant factors. We then develop a two-country asset pricing model with multinational firms in order to inspect and quantify the mechanism underlying the increases in stock market correlations and FDI. We find that the increase in FDI positions in the calibrated model can account for approximately one third of the rise in the observed stock market correlations. We also extend the model to account for increases in trade and portfolio diversification and find that, in contrast to FDI, these two factors do not generate an increase in stock market correlations.
Author: Danni Yang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author:
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ISBN:
Category :
Languages : en
Pages :
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Author: Borja Larrain
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
This paper studies the impact of stock market development on cross country relative prices (the real exchange rate). A nonlinear relationship is uncovered in the cross section: prices and the stock market increase together in the beginning; then prices fall as the stock market continues to develop. In fact, among rich countries the relationship between prices and the stock market is negative. This result obtains after controlling for per capita income and for endogeneity issues by using legal origins. A small open economy model is presented to explain the connection between stock market development and relative prices: better investment opportunities increase consumption levels and the price of nontradable goods (income effect); but if stock market assets are less labor intensive than previous entrepreneurial technologies, prices can fall as the stock market grows because more labor is available for producing nontradables (substitution effect). This paper illustrates the connection of the stock market with goods and labor markets; it also has potential implications for the political economy of financial development. In a sideline contribution, it provides prices for entrepreneurial assets.
Author: António Afonso
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We examine 22 determinants of stock market correlations in a panel setting with 651 country pairs of developed economies over the 2001-2018 period, while accounting for model uncertainty and reverse causality. On the one hand, we find, that a number of determinants, well established in the literature, e.g. trade, institutional distance, and exchange rate volatility fail the robustness test. On the other hand, we find strong evidence supporting several others: (1) inertia, with current correlation being the best single predictor of the future stock market correlation (2) positive impact of the market size (3) imperative role of the interconnected financial factors: capital mobility, financial development, and portfolio equity flows. With the expected future growth of economies and their capital markets as well as deepening financial liberalization, this paper brings strong support to the hypothesis of diminishing international diversification potential.
Author: António Afonso
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We examine 22 determinants of stock market correlations in a panel setting with 651 country pairs of developed economies over the 2001-2018 period, while accounting for model uncertainty and reverse causality. On the one hand, we find, that a number of determinants, well established in the literature, e.g. trade, institutional distance, and exchange rate volatility fail the robustness test. On the other hand, we find strong evidence supporting several others: (1) inertia, with current correlation being the best single predictor of the future stock market correlation (2) positive impact of the market size (3) imperative role of the interconnected financial factors: capital mobility, financial development, and portfolio equity flows. With the expected future growth of economies and their capital markets as well as deepening financial liberalization, this paper brings strong support to the hypothesis of diminishing international diversification potential.
Author: Richard Portes
Publisher:
ISBN:
Category : Capital movements
Languages : en
Pages : 60
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Book Description
We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. Distance proxies some information costs, and other variables explicitly represent information transmission, an information asymmetry between domestic and foreign investors, and the efficiency of transactions. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information is the main determinant of the pattern of international transactions, while there is little support in our data for diversification and return-chasing motives for transactions."--Authors.
Author: World Bank
Publisher: World Bank Publications
ISBN: 1464814953
Category : Business & Economics
Languages : en
Pages : 511
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Book Description
Global value chains (GVCs) powered the surge of international trade after 1990 and now account for almost half of all trade. This shift enabled an unprecedented economic convergence: poor countries grew rapidly and began to catch up with richer countries. Since the 2008 global financial crisis, however, the growth of trade has been sluggish and the expansion of GVCs has stalled. Meanwhile, serious threats have emerged to the model of trade-led growth. New technologies could draw production closer to the consumer and reduce the demand for labor. And trade conflicts among large countries could lead to a retrenchment or a segmentation of GVCs. World Development Report 2020: Trading for Development in the Age of Global Value Chains examines whether there is still a path to development through GVCs and trade. It concludes that technological change is, at this stage, more a boon than a curse. GVCs can continue to boost growth, create better jobs, and reduce poverty provided that developing countries implement deeper reforms to promote GVC participation; industrial countries pursue open, predictable policies; and all countries revive multilateral cooperation.
Author: Eelke de Jong
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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