Does cultural distance matter in international stock market comovement? Evidence from emerging economies around the world

Abstract

Prior research suggests an inverse relationship between geographic distance and financial market linkages. In this paper, we examine whether and how cultural distance between countries mitigates this finding. We find that country-pairs exhibit higher linkages if they have smaller cultural distance.The result remains significant to alternative measures of linkage. Finally, the cultural effect seems to be more pronounced for active trading country-pairs than thin-trading country-pairs.

Determinants of Stock Market Co-Movements between Pakistan and Asian Emerging Economies

“…They report that trade is significantly and positively associated with stock market co-movement. In addition, our results are in line with Forbes and Chinn (2004), Lucey and Zhang (2010). They report that the extent of stock market co-movement is dependent on the extent of strong bilateral trade relationships.…”

Altruism to Strangers for Our Own Sake: Domestic Effects from Immigration

“…al (2005); Lee et. al (2008);Lucey, Zhang (2010)) and "home bias" (Duru, Reeb 2002;Chan et.al. 2005) effects.…”

An analysis of returns and volatility spillovers and their determinants in emerging Asian and Middle Eastern countries

“…An open question that remains to be analysed is whether integration among emerging markets is driven by similar factors or whether it is driven by completely different factors that are specific to the emerging markets' nature, given the still underdeveloped financial markets of the latter in comparison with the developed world markets (Bekaert and Harvey, 1997). Factors that have been shown to influence the extent of integration among developed stock markets significantly include bilateral trade, exchange rate volatility, real interest rate differentials, physical distance, regional effects, market volatility and capitalization differentials (see, among others, Pretorius (2002), Lucey and Zhang (2010) and Graham et al (2012)). …”