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    Explaining Stock Market Correlation: A Gravity Model Approach


    Flavin, Thomas and Hurley, Margaret J. and Rousseau, Fabrice (2002) Explaining Stock Market Correlation: A Gravity Model Approach. The Manchester School, 70 (51). pp. 87-106.

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    Abstract

    A gravity model, frequently used to explain trade patterns, is used to explain stock market correlations. The main result of the trade literature is that geography matters for goods markets. Physical location and trading costs should be less of an issue in asset markets. However, we find that geographical variables still matter when examining equity market linkages. In particular, the number of overlapping opening hours and sharing a common border tends to increase cross–country stock market correlation. These results may stem from asymmetrical information and investor sentiment, lending some empirical support for these explanations of the international diversification puzzle.

    Item Type: Article
    Keywords: Stock Market Correlation; Gravity Model Approach;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 7996
    Identification Number: https://doi.org/10.1111/1467-9957.70.s1.5
    Depositing User: Thomas Flavin
    Date Deposited: 07 Mar 2017 15:47
    Journal or Publication Title: The Manchester School
    Publisher: Blackwell Publishing
    Refereed: Yes
    URI:

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