Journal
REVIEW OF FINANCIAL STUDIES
Volume 24, Issue 12, Pages 3841-3890Publisher
OXFORD UNIV PRESS INC
DOI: 10.1093/rfs/hhr082
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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.
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