Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Department of Economics, Umeň University Umeň Economic Studies, Department of Economics, Umeň University

No 924:
Trust and stock market correlation: a cross-country analysis

Yuna Liu ()

Abstract: Several studies have shown that the level of trust between agents is an important determinant of financial decisions. This paper studies this issue further by analyzing whether the measured level of trust in different countries can explain bilateral stock market correlations. Using a panel of 62 countries and 1891 country-pairs over a period of ten years, the effect of generalized trust on stock market correlations is analyzed. One finding is that generalized trust among nations is a robust predictor for stock market correlation. Another is that the trust effect is larger for countries which are close to each other which indicates that distance mitigates the trust effect. Finally, we confirm the effect of trust upon stock market correlations, by using particular trust data (bilateral trust between country A and country B) as an alternative measurement of trust.

Keywords: International Financial Markets; Stock Market Correlation; Trust; Volatility; Portfolio Diversification; Stock Market Participation; (follow links to similar papers)

JEL-Codes: D31; F15; G11; G15; (follow links to similar papers)

29 pages, March 16, 2016

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

178082_ues924.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to David Skog ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:umnees:0924 This page was generated on 2016-03-22 15:31:10