This paper provides an alternative explanation of the negative relationship between price synchronicity and proprietary right protection that are uncorrelated to the information hypothesis. Using empirical data for 40 countries, we show that stock market volatility and firm size have significant impact on stock price synchronicity. We find significant correlations of international R2 disparity with industry structure integrations. The derived industry integration indices that capture industry correlations significantly explain cross-sectional and temporal variations in price synchronicity. The results imply that tighter industry integration leads to higher R2, and also explain away the property rights factor found in the information hypothesis.
Price Synchronicity, Market Capitalization, Property Rights Protection, Industry Structures, Information Hypothesis, Market-wide risk
Finance | Finance and Financial Management
SR, Hao Cheng; LIM, Kian Guan; SING, Tien Foo; and WANG, Long.
Industry integration and stock price synchronicity. (2017). Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5334
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