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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number
14802.
Length: Date of creation: Mar 2009 Date of revision: Handle: RePEc:nbr:nberwo:14802
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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 F55 - International Economics - - International Relations and International Political Economy - - - International Institutional Arrangements G1 - Financial Economics - - General Financial Markets G15 - Financial Economics - - General Financial Markets - - - International Financial Markets P45 - Economic Systems - - Other Economic Systems - - - International Linkages P48 - Economic Systems - - Other Economic Systems - - - Other Economic Systems: Political Economy; Legal Institutions;
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RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, .
"Legal Determinants of External Finance,","
CRSP working papers
324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997.
" Legal Determinants of External Finance,"
Journal of Finance,
American Finance Association, vol. 52(3), pages 1131-50, July.
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