The structure of equity markets across countries: Scarcity and stock valuations

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Abstract

We build a dataset of the industrial composition of the stock market and the economy for 26 countries. This composition is far from representative of that of the economy, particularly in less-developed markets. Based on this, we build a measure of scarcity of investable securities and show that industries that are underrepresented relative to the economy exhibit higher valuations. Moreover, valuation differences are shown to be more important when informational issues make it more difficult for firms to get listed.

Original languageEnglish
Pages (from-to)385-397
Number of pages13
JournalFinance Research Letters
Volume11
Issue number4
DOIs
StatePublished - 1 Dec 2014
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2014 Elsevier Inc.

Keywords

  • Cross-country
  • Financial development

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