Credit constraints and stock price volatility
By: Galina Hale, Assaf Razin, Hui Tong
Contributors: Razin, Assaf; Tong, Hui; National Bureau of Economic Research
Series: NBER working paper series -- working paper 13089; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13089.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "This paper addresses how creditor protection affects the volatility of stock market prices.  Credit protection reduces the probability of oscillations between binding and non-binding states of the credit constraint; thereby lowering the rate of return variance.  We test this prediction of a Tobin's q model, by using cross-country panel regression on stock price volatility in 40 countries over the period from 1984 to 2004.  Estimated probabilities of a liquidity crisis are used as a proxy for the probability that credit constraints are binding.  We find support for the hypothesis that institutions that help reduce the probability of oscillations between binding and non-binding states of the credit constraint also reduce asset price volatility"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/16/2007.

Includes bibliographical references.

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