Global Growth Opportunities and Market Integration / Geert Bekaert, Campbell R. Harvey, Christian Lundblad, Stephan Siegel.

Format:

Book

Author/Creator:

Bekaert, Geert.

Contributor:

National Bureau of Economic Research.

Harvey, Campbell R.

Lundblad, Christian.

Siegel, Stephan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10990.

NBER working paper series no. w10990

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

We measure a country's growth opportunities by investigating how its industry mix is priced in global capital markets, using price earnings ratios of global industry portfolios. We derive three sets of empirical results. First, these exogenous growth opportunities strongly predict future changes in real GDP and investment in a large panel of countries. This relation is strongest in countries that have liberalized their capital accounts, equity markets, and banking systems. Second, we re-examine the link between financial development, investor protection, capital allocation, and growth. We find that financial development and investor protection measures are much less important in aligning growth opportunities with growth than is capital market openness. Third, we formulate new tests of market integration and segmentation. Under integration, the difference between a country's local PE ratio and its global counterpart should not predict relative growth, but the difference between its "exogenous" global PE ratio and the world market PE ratio should predict relative growth.

Notes:

Print version record

December 2004.