Market frictions and the geographical location of global stock exchanges. Evidence from the S&P Global Index

Hudson, Robert; Gregoriou, Andros

Abstract

We examine the impact of trading costs on investor average holding periods for the S&P global 1200 index. We report overwhelming evidence that global equity indices cannot be pooled. When we differentiate between stock indices based on their geographical location, we discover that for companies listed in the USA, Europe, Canada and Australia, there are no market frictions enabling continuous high frequency trading. However, companies listed in Latin America and Asia face significant barriers to trading in the form of transaction costs. We ascertain that the geographical location of stock markets plays a vital role in achieving international portfolio diversification.

Citation

Hudson, R., & Gregoriou, A. (in press). Market frictions and the geographical location of global stock exchanges. Evidence from the S&P Global Index. Journal of Economic Studies, https://doi.org/10.1108/JES-03-2020-0091

• Journal Article Type: Article
• Acceptance Date: Apr 20, 2020
• Online Publication Date: May 22, 2020
• Deposit Date: Apr 21, 2020
• Publicly Available Date: Apr 22, 2020
• Journal: Journal of Economic Studies
• Print ISSN: 0144-3585
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1108/JES-03-2020-0091
• Keywords: Stock Market Liquidity; Geographical Location of Stock Exchanges; S&P 1200 Global Index.
• Public URL: https://hull-repository.worktribe.com/output/3499126
• Publisher URL: https://www.emerald.com/insight/content/doi/10.1108/JES-03-2020-0091/full/html
• Related Public URLs: https://research.brighton.ac.uk/en/publications/market-frictions-and-the-geographical-location-of-global-stock-ex