The Internationalization of Equity Markets (National Bureau of Economic Research Project Report)

This timely volume addresses three important recent trends in the internationalization of United States equity markets: extensive market integration through foreign investment and links among stock prices around the world; increasing securitization as countries such as Japan come to rely more than ever before on markets in equities and bonds at the expense of banks; and the opening of national financial systems of newly industrializing countries to international financial flows and institutions, as governments remove capital controls and other barriers. Eight essays examine such issues as the current extent of international market integration, gains to U.S. investors through international diversification, home-country bias in investing, the role of time and location around the world in stock trading, and the behavior of country funds. Other, long-standing questions about equity markets are also addressed, including market efficiency and the accuracy of models of expected returns, with a particular focus on variances, covariances, and the price of risk according to the Capital Asset Pricing Model. This Timely Volume Addresses Important Recent Trends In The Internationalization Of Equity Markets. These Trends Include Increasing Securitization As Many Countries Come To Rely More Than Ever Before On Markets In Equities And Bonds, Extensive Market Integration Through Foreign Investment And Resulting Links Among Stock Prices Around The World, And The Opening Of National Financial Systems Of Newly Industrializing Countries To International Financial Flows And Institutions As Governments Remove Capital Controls And Other Barriers. Eight Essays Examine Such Issues As The Current Extent Of International Market Integration, Gains To U.s. Investors Through International Diversification, Fundamental Macroeconomic Determinants Of Securities Prices, Home-country Bias In Investing, Securities Transactions Taxes, The Role Of Time And Location Around The World In Stock Trading, And The Behavior Of Country Funds. Other Long-standing Questions About Equity Markets Are Also Addressed, Such As Market Efficiency And The Accuracy Of Models Of Expected Returns, Including A Particular Focus On Variances, Covariances, And The Price Of Risk, As In The Capital Asset Pricing Model. The Internationalization Of Equity Markets Will Interest Academic And Business Economists Concerned With Stock Market Behavior Around The World.--book Jacket. I. Asset Pricing And Home-country Bias In Internationally Integrated Markets. 1. A Test Of The International Capm Using Business Cycles Indicators As Instrumental Variables / Bernard Dumas -- 2. An Exploratory Investigation Of The Fundamental Determinants Of National Equity Market Returns / Wayne Ferson And Campbell R. Harvey -- 3. Tests Of Capm On An International Portfolio Of Bonds And Stocks / Charles M. Engel -- 4. International Equity Transactions And U.s. Portfolio Choice / Linda L. Tesar And Ingrid M. Werner -- Ii. Trading Volume, Location, Emerging Markets, Taxes, Controls, And Other Imperfections. 5. The Effect Of Barriers To Equity Investment In Developing Countries / Stijn Claessens And Moon-whoan Rhee -- 6. International Experiences With Securities Transaction Taxes / John Y. Campbell And Kenneth A. Froot -- 7. Price Volatility And Volume Spillovers Between The Tokyo And New York Stock Markets / Wen-ling Lin And Takatoshi Ito -- 8. What Moves The Discount On Country Equity Funds? / Gikas Hardouvelis, Rafael La Porta, And Thierry A. Wizman. Edited By Jeffrey A. Frankel. The Papers Were Originally Presented At A Conference Held In San Francisco, California, On October 1-2, 1993.--pref. Includes Bibliographical References And Indexes.