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The Internationalization of Equity Markets

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.

426 pages | 32 line drawings, 65 tables | 6 x 9 | © 1994

National Bureau of Economic Research Project Report

Economics and Business: Economics--International and Comparative, Economics--Money and Banking

Table of Contents

Introduction 1
Jeffrey A. Frankel
1: A Test of the International CAPM Using Business Cycles Indicators as
Instrumental Variables 23
Bernard Dumas
2: An Exploratory Investigation of the Fundamental Determinants of National
Equity Market Returns 59
Wayne Ferson, Campbell R. Harvey.
3: Tests of CAPM on an International Portfolio of Bonds and Stocks 149
Charles M. Engel
4: International Equity Transactions and U.S. Portfolio Choice 185
Linda L. Tesar, Ingrid M. Werner.
5: The Effect of Barriers to Equity Investment in Developing Countries 231
Stijn Claessens, Moon-Whoan Rhee.
6: International Experiences with Securities Transaction Taxes 277
John Y. Campbell, Kenneth A. Froot.
7: Price Volatility and Volume Spillovers between the Tokyo and New York
Stock Markets 309
Wen-Ling Lin, Takatoshi Ito.
8: What Moves the Discount on Country Equity Funds? 345
Gikas Hardouvelis, Rafael La Porta, Thierry A. Wizman.
Contributors 405
Author Index 407
Subject Index 411

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