We investigate the existence and significance of a cross-sectional relation between idiosyncratic volatility and expected returns at the global level by introducing a global idiosyncratic volatility measure and globally diversified test assets. We find that the portfolios with the highest and...

The purpose of this paper is to analyze some leximetric data for a number of developed and less developed countries hitherto unavailable to examine (i) the changing state of shareholder protection and (ii) its connection with stock market development and capital accumulation. It finds a strong...

There has been controversy between (two-country) theory and the empirics about whether hedging against real exchange rate fluctuations in the goods market influences foreign equity holdings. This study reconciles the theory with the empirics by introducing a multi-country framework with...

Given the rapidly evolving nature of financial globalization, this paper models and predicts financial integration in a changing world. By decomposing integration into global risk, local risk and estimation risk, we argue that greater integration is mainly driven by global factors, not...

Utilizing approximately 51,000 sample firms from developed markets over 1995-2014, we document a stark heterogeneity in global integration at the firm-level and study its implications for diversification. Specifically, the adjusted R-square, our integration measure, is widely distributed across...

Holdings of cross-border bilateral assets are highly responsive to information frictions, market size, transaction costs, and trade ties. But empirical support using transactions data are constrained by the lack of comprehensive bilateral capital flows data covering large sample of economies for...

Three important external determinants of sovereign spreads in emerging countries are reviewed: balance sheet effects, global risk aversion and contagion. While there are ways to reduce the detrimental impact of balance sheet effects, these are either hard to implement or costly. Insurance...

Given the dramatic globalization over the past twenty years, does it make sense to segregate global equities into “developed” and “emerging” market buckets? We argue that the answer is still yes. While correlations between developed and emerging markets have increased, the process of...

This study investigates the tail dependence structures of sovereign credit default swaps (CDSs) and three global risk factors in BRICS countries using a copula approach, which is popular for capturing the “true” tail dependence based on the “distribution-adjusted” joint marginals. The...

This paper studies how investors allocate their portfolio equity investment internationally. I develop a model to formalize the mechanism by which investors extract the information about foreign target countries from foreign direct investment (FDI): When investors make FDI, due to their control...