A gravity analysis of international stock market linkages

Terence Tai Leung Chong, Wing Keung WONG, Juan Zhang

    Research output: Contribution to journalJournal articlepeer-review

    6 Citations (Scopus)


    The last decade has witnessed a marked improvement in information technology. Such an improvement has reduced the information cost for market participants. Thus, whether the influence of geographic factors on international financial linkage is still significant nowadays is an important question yet to be addressed. This article develops a gravity model of international financial linkages. Using the panel data of bilateral crosscountry stock market correlations of 23 countries, it is found that the correlations are negatively associated with the Great Circular Distance (GCD) between the financial centres of these countries and positively associated with the duration of overlapping trading hours among stock exchanges and the colonial links between countries. However, whether the countries share a common border or language does not affect the stock market correlations.

    Original languageEnglish
    Pages (from-to)1315-1319
    Number of pages5
    JournalApplied Economics Letters
    Issue number14
    Publication statusPublished - Sept 2011

    Scopus Subject Areas

    • Economics and Econometrics


    Dive into the research topics of 'A gravity analysis of international stock market linkages'. Together they form a unique fingerprint.

    Cite this