Citation

Discussion Paper Details

Please find the details for DP8142 in an easy to copy and paste format below:

Full Details

Title: What Segments Equity Markets?

Author(s): Geert Bekaert, Campbell Harvey, Christian T Lundblad and Stephan Siegel

Publication Date: December 2010

Keyword(s): capital controls, earnings yield, financial development, financial openness, globalization, market integration, political risk, quality of institutions and valuation differentials

Programme Area(s): Financial Economics

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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8142

Bibliographic Reference

Bekaert, G, Harvey, C, Lundblad, C and Siegel, S. 2010. 'What Segments Equity Markets?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8142