TY  - JOUR
AB  - Purpose We examine the impact of market frictions in the form of trading costs on investor average holding periods for stocks in the S&P global 1200 index to examine constraints on international portfolio diversification.Design/methodology/approach We determine whether it is appropriate to pool stocks listed in the USA, Canada, Latin America, Europe, Japan, Asia and Australia into investigations using the same empirical specification. This is very important because the pooled effects may not provide consistent estimates of the average.Findings We report overwhelming econometric evidence that it is not valid to pool stocks in all the underlying regional equity indices for our investigation, indicating that the effect of frictions varies between markets.Research limitations/implications When we pool the stocks within markets, we discover that for companies listed in the USA, Europe, Canada and Australia, market frictions do not significantly influence holding periods and hence are not a barrier to portfolio rebalancing. However, companies listed in Latin America and Asia face market frictions, which are significant in terms of increasing holding periods.Practical implications We ascertain that taking into account the properties of stock markets in different geographical locations is vital for understanding the limits on achieving international portfolio diversification.Originality/value Unlike prior research, we overcome the problems caused by contemporaneous correlation, endogeneity and joint determination of investor average holding periods and trading costs by employing the Generalized Method of Moments (GMM) system panel estimator. This makes our empirical estimates robust and more reliable than the previous empirical research in this area.
VL  - 48
IS  - 2
SN  - 0144-3585
DO  - 10.1108/JES-03-2020-0091
UR  - https://doi.org/10.1108/JES-03-2020-0091
AU  - Gregoriou Andros
AU  - Hudson Robert
PY  - 2020
Y1  - 2020/01/01
TI  - Market frictions and the geographical location of global stock exchanges. Evidence from the S&P Global Index
T2  - Journal of Economic Studies
PB  - Emerald Publishing Limited
SP  - 354
EP  - 366
Y2  - 2024/04/23
ER  -