Financial globalization and stock market risk

Omar Esqueda, Tibebe A. Assefa and Andre Mollick ()

Journal of International Financial Markets, Institutions and Money, 2012, vol. 22, issue 1, 87-102

Abstract: This paper examines stock market volatility measured by either “beta-volatility” or by the standard deviation of stock returns over 1995–2007. In our dynamic panel data framework, after controlling for size, turnover, and real output growth, we find some support to increases in financial integration reducing total stock return volatility for representative emerging markets, with almost no impact for industrial economies. Allowing for feedback effects from stock volatility to stock turnover, we obtain a richer interpretation for the broadening of investor basis hypothesis: more integrated financial markets leads to lower stock volatility, yet these are not so strong as found previously and are not accompanied by more turnover.

Keywords: Country risk; Dynamic panels; Global stock markets; International financial integration; Stock volatility (search for similar items in EconPapers)
JEL-codes: F21 F32 G15 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:22:y:2012:i:1:p:87-102

DOI: 10.1016/j.intfin.2011.07.006

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