Abstract

We propose a new, valuation-based measure of world equity market segmentation. While we observe decreased levels of segmentation in many countries, the level of segmentation remains significant in emerging markets. We characterize the factors that account for variation in market segmentation both through time as well as across countries. Both a country’s regulation with respect to foreign capital flows and certain nonregulatory factors are important. In particular, 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.

Citation

Bekaert, G., Harvey, C. R., Lundblad, C. T., & Siegel, S. (2011). What segments equity markets? The Review of Financial Studies, 24(12), 3841-3890. doi:10.1093/rfs/hhr082

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• Keyword(s):
• emerging markets 36
• equity markets 41
• finance 266
• global business 164

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