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Stock market synchronization and institutional distance

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  • Guo, Nian-zhi
  • Tu, Anthony H.

Abstract

Our primary aim in this study is to examine the relationship that exists between stock market synchronization and institutional distance. We examine the ‘liability of foreignness’ (LOF) hypothesis and fivedifferent institutional distance conceptualizations (economic, financial, political, demographic and global connectedness) proposed by Berry, Guillén and Zhou (2010). The resultsreveal thatbetween 2003 and 2016, all of these institutional distances had significant impacts on stock market synchronization, with economic distance having a positive influence (thereby rejecting the LOF hypothesis), whilst the other four institutional distances were all found to have negative influences (thereby providing support for the LOF hypothesis).

Suggested Citation

  • Guo, Nian-zhi & Tu, Anthony H., 2021. "Stock market synchronization and institutional distance," Finance Research Letters, Elsevier, vol. 42(C).
    • Handle: RePEc:eee:finlet:v:42:y:2021:i:c:s1544612321000155
    DOI: 10.1016/j.frl.2021.101934
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    Cited by:

    1. You, Kefei & Raju Chinthalapati, V.L. & Mishra, Tapas & Patra, Ramakanta, 2024. "International trade network and stock market connectedness: Evidence from eleven major economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    2. Du, Yan & Goodell, John W. & Piljak, Vanja & Vulanovic, Milos, 2022. "Subsidiary financing choices: The roles of institutional distances from home countries," International Review of Financial Analysis, Elsevier, vol. 83(C).
    3. Bonga-Bonga, Lumengo & Manguzvane, Mathias Mandla, 2023. "Stock market correlation and geographical distance: does the degree of economic integration matter?," MPRA Paper 116476, University Library of Munich, Germany.

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    More about this item

    Keywords

    Stock market synchronization; Institutional distance; Liability of foreignness;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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