Measuring the effects of geographical distance on stock market correlation

Eckel, Stefanie; Löffler, Günter; Maurer, Alina; Schmidt, Volker

doi:10.1016/j.jempfin.2010.12.001

Cited by 36 publications

(16 citation statements)

References 19 publications

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“…10. Our finding is slightly different from Eckel et al (2011) who use a mark correlation function of residual stock returns and find that in the US the spatial correlation of stock returns disappears after 50 miles. 11.…”

Section: Resultscontrasting

confidence: 99%

Do agglomeration economies affect the local comovement of stock returns? Evidence from China

Firth¹,

Shan

2016

Urban Studies

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Prior studies in finance have examined the comovement of stock returns of firms headquartered in the same location. One interpretation of the results is that local investors have a ‘local bias’ due to an information advantage on local firms. We propose that localised agglomeration economies affect the fundamentals of local firms, resulting in the local comovement of stock returns. Using data for China A-share listed firms from 1997 to 2007, we find evidence of the comovement of stock returns of Chinese firms headquartered in the same city. We find inconsistent evidence for the local bias theory. The comovement of the stock returns of firms headquartered in the same city is stronger when the agglomeration economies in the city are stronger, suggesting that localised agglomeration economies provide an alternative explanation of the comovement of stock returns

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Section: Resultscontrasting

confidence: 99%

Do agglomeration economies affect the local comovement of stock returns? Evidence from China

Firth¹,

Shan

2016

Urban Studies

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“…Secondly, markets within a short geographic distance tend to display greater co-movement than those farther apart (Bracker, Docking, & Koch, 1999;Pirinsky & Wang, 2006;Chong, Wong, & Zhang, 2011;Eckel, Loffler, Maurer, & Schmidt, 2011). Thirdly, market interdependence increases as economic integration intensifies, such as increased bilateral trade (Bracker, Docking, & Koch, 1999;Johnson & Soenen, 2002;Pretorius, 2002;Tavares, 2009;Walti, 2011;Abbas, Khan, & Shah, 2013).…”

Section: Literature On Financial Market Interdependencementioning

confidence: 99%

Financial liberalisation and international market interdependence: Evidence from China’s stock market in the post-WTO accession period

Chen

Yao

et al. 2014

Journal of International Financial Markets, Institutions and Mo

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This paper studies China's stock market with respect to financial liberalization and international market interdependence after its accession to the WTO in 2001. Using the multifactor R-squared measure, we derive a normalized index to measure the impact of financial liberalization policies on stock market interdependence between China and the world. Some of China's financial liberalization measures, such as QFII and exchange rate reform, are found to have played an important role in increasing market interdependence. After the US credit crunch in 2007 and the world financial crisis in the following years, some anomalies were observed as China's stock market was more interdependent of the global market than the US stock market in some specific periods. These anomalies may have been related to the former's overreaction and economic overheating.JEL: C22, C38, F36, G15, G18

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“…Their operating performance was measured by return on assets (ROA) [19,20], while their technical efficiency (TE) was measured by the stochastic frontier analysis (SFA) model [21,22]. We measured the participants' risk preference in the different capital markets, which we define as risk culture, by calculating the degree of price fluctuation brought by recessive factors [23,24].…”

Section: Introductionmentioning

confidence: 99%

The Influence of Risk Culture on the Performance of International Joint-Venture Securities

Tang

Wang

et al. 2020

Sustainability

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With the development of economic globalization, culture is a key factor supporting the sustainability of foreign direct investment (FDI), especially for multinational enterprises. This paper takes the Chinese capital market as a sample and, combined with interviews with managers of international joint-venture securities (IJVS), finds that the culture of participants formed in developed and emerging capital market has a significant impact on the performance of IJVS. Using the degree of price fluctuation to measure the risk culture of each capital market, this paper observes that the risk culture in the Chinese capital market is significantly stronger than that of developed countries. This paper also finds that the stronger the risk culture IJVS shareholders have, the better they can adapt to the environment of the Chinese capital market and the better the performance they can achieve. Furthermore, risk culture distance, calculated by the risk culture differences between foreign shareholders and Chinese capital market, are significantly negatively correlated with IJVS performance and efficiency.

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Measuring the effects of geographical distance on stock market correlation

Cited by 36 publications

References 19 publications

Do agglomeration economies affect the local comovement of stock returns? Evidence from China

Do agglomeration economies affect the local comovement of stock returns? Evidence from China

Financial liberalisation and international market interdependence: Evidence from China’s stock market in the post-WTO accession period

The Influence of Risk Culture on the Performance of International Joint-Venture Securities

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