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The role of distance and financial development: Evidence from international financial markets

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  • Li, Wei
  • Wang, Xin
  • Zhang, Haofei

Abstract

This paper analyzes the role of distance and financial development in equity portfolio performance, using panel data on mutual fund holdings in the U.S. stock market from 39 countries. Our paper shows that financial development, represented by financial depth, is positively correlated with returns and returns’ standard deviation. Fund managers from countries with deeper financial markets earn higher returns at the cost of higher risks. This conjecture can be explained by our findings that fund managers from countries with deeper financial markets prefer small and growth stocks.

Suggested Citation

  • Li, Wei & Wang, Xin & Zhang, Haofei, 2024. "The role of distance and financial development: Evidence from international financial markets," International Review of Financial Analysis, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:finana:v:92:y:2024:i:c:s1057521924000401
    DOI: 10.1016/j.irfa.2024.103108
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    Cited by:

    1. Yan, Jiajia & Zhang, Chenyan, 2024. "Financial institution agglomeration and corporate labor allocation efficiency—Based on the context of government debt expansion," Finance Research Letters, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Distance; Financial development; Returns; Returns’ standard deviation;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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