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Cultural Tightness-Looseness and Stock Market Integration

Author

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  • Todea Anita

    (Babes-Bolyai University, Romania)

  • Todea Alexandru

    (Babes-Bolyai University, Romania)

Abstract

This study examines the relationship between Cultural Tightness-Looseness (CTL) and stock market integration, focusing on a sample of 36 markets from 2004 to 2022. The analysis demonstrates that “loose” cultures, characterized by greater social flexibility, exhibit higher levels of financial integration with the global market. This relationship remains robust after controlling for alternative cultural determinants, such as genetic distance and Hofstede’s dimensions. Additionally, the study investigates CTL’s moderating effect on the relationship between global uncertainty and stock market integration. The findings reveal that in “loose” countries, the impact of global uncertainty on integration is less pronounced, suggesting a buffering effect. The results, validated through alternative specifications and robustness tests, extend the literature by identifying CTL as a unique cultural determinant of financial integration, distinct from long-term cultural barriers like genetic distance. These insights have implications for understanding market behavior under varying cultural and uncertainty conditions.

Suggested Citation

  • Todea Anita & Todea Alexandru, 2024. "Cultural Tightness-Looseness and Stock Market Integration," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 69(3), pages 43-55.
    • Handle: RePEc:vrs:subboe:v:69:y:2024:i:3:p:43-55:n:1005
    DOI: 10.2478/subboec-2024-0014
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    References listed on IDEAS

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    More about this item

    Keywords

    foreign portfolio investments; foreign bias; unfamiliarity; cultural tightness/looseness;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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