Abstract

SCHUTTE, María Gabriela  and  LIEBENBERG, Ivonne. Information production and stock return co-movement in emerging nations. Cuad. Adm. [online]. 2010, vol.23, n.40, pp.215-238. ISSN 0120-3592.

This study does an empirical assessment to see if information production in capital markets can explain fluctuations in stock return co-movement in emerging countries. Two hypotheses are proposed and tested: (1) co-movement increases during recessions and drops during expansions more intensely in low-income countries, and (2) the more variable the information production is, the stronger the connection between co-movement and economic activity. With information on 88,000 stocks in 36 nations during the period from 1980 to 2007, the results support both hypotheses, leading to significant practical effects for investors and regulating bodies in emerging nations. Promoting institutions that can guarantee a constant flow of information between companies and investors is a necessary condition for improving access to low-cost external capitals, which is essential to the future economic development of emerging nations.

Keywords : information production; co-movement.

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