DP3681 Financial Development and Stock Returns: A Cross-Country Analysis
| Author(s): | Harris Dellas, Martin Hess |
| Publication Date: | January 2002 |
| Keyword(s): | financial development, stock returns |
| JEL(s): | G15, O10 |
| Programme Areas: | International Macroeconomics, Financial Economics |
| Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=3681 |
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.