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Financial Development and the Sensitivity of Stock Markets to External Influences
Author(s) -
Dellas Harris,
Hess Martin K.
Publication year - 2002
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00348
Subject(s) - economics , stock (firearms) , financial market , monetary economics , capital market , financial economics , finance , mechanical engineering , engineering
The paper investigates how the relative contribution of external factors to stock price movements varies with the degree of financial development. It is found that financial development makes stock markets more susceptible to external influences (both financial and macroeconomic). Interestingly, this effect is present even after having accounted for capital controls and international trade effects.