TY - JOUR
T1 - A gravity analysis of international stock market linkages
AU - Chong, Terence Tai Leung
AU - WONG, Wing Keung
AU - Zhang, Juan
N1 - Copyright:
Copyright 2011 Elsevier B.V., All rights reserved.
PY - 2011/9
Y1 - 2011/9
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=79961094083&partnerID=8YFLogxK
U2 - 10.1080/13504851.2010.537614
DO - 10.1080/13504851.2010.537614
M3 - Journal article
AN - SCOPUS:79961094083
SN - 1350-4851
VL - 18
SP - 1315
EP - 1319
JO - Applied Economics Letters
JF - Applied Economics Letters
IS - 14
ER -