The last decade has witnessed a marked improvement in information technology. Such an improvement has reduced the information cost for market participants.

Thus, whether the influence of geographic factors on international financial linkage is still significant nowadays is an important question yet to be addressed. This article develops a gravity model of international financial linkages.

A gravity analysis of international stock market linkages: Applied Economics Letters: Vol 18, No 14

Using the panel data of bilateral cross-country stock market correlations of 23 countries, it is found that the correlations are negatively associated with the Great Circular Distance GCD between the financial centres of these countries and positively associated with the duration of overlapping trading hours among stock exchanges and the colonial links between countries.

However, whether the countries share a common border or language does not affect the stock market correlations.

A spatial analysis of international stock market linkages

Article Purchase 24 hours access for EUR 35, Issue Purchase 30 days access for EUR , Journal Applied Economics Letters Volume 18, - Issue Submit an article Journal homepage. Terence Tai-Leung Chong Department of Economics , The Chinese University of Hong Kong , Shatin, Hong Kong Correspondence chong cuhk.

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A Gravity Analysis of International Stock Market Linkages by Wing-Keung Wong, Terence Tai-Leung Chong, Juan Zhang :: SSRN

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