Global growth opportunities and market integration
By: Geert Bekaert ... [et al.].
Contributors: Bekaert, Geert.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 10990.; Working paper series (National Bureau of Economic Research) -- working paper no. 10990.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 32
Subjects: Economic development -- Econometric models; Economic policy
Description: "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"--National Bureau of Economic Research web site.
Notes: "December 2004."

Includes bibliographical references (p. 29-32).

Also available in PDF from the NBER world wide web site (www.nber.org).