Economic freedom and the stability of stock prices: A cross-country analysis

Benjamin M. Blau; Tyler J. Brough; Diana W. Thomas

doi:10.1016/j.jimonfin.2013.12.001

Economic freedom and the stability of stock prices: A cross-country analysis

Benjamin M. Blau, Tyler J. Brough, Diana W. Thomas

Research output: Contribution to journal › Article

8 Scopus citations

Abstract

This paper investigates the link between economic freedom and the price stability of individual securities in a unique setting. Using a sample of 327 American Depositary Receipts (ADRs), we find an inverse relation between the economic freedom of a ADRs' home country and the price volatility of the ADR. This negative correlation is driven primarily by certain components of economic freedom, such as property right protection, the soundness of the money, and the level of free trade in the home country. Further, we find evidence that less regulation and less government control of markets in the home country leads to more stable ADR prices.

Original language	English
Pages (from-to)	182-196
Number of pages	15
Journal	Journal of International Money and Finance
Volume	41
DOIs	https://doi.org/10.1016/j.jimonfin.2013.12.001
Publication status	Published - Mar 2014
Externally published	Yes

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All Science Journal Classification (ASJC) codes

Economics and Econometrics
Finance

Cite this

Blau, B. M., Brough, T. J., & Thomas, D. W. (2014). Economic freedom and the stability of stock prices: A cross-country analysis. Journal of International Money and Finance, 41, 182-196. https://doi.org/10.1016/j.jimonfin.2013.12.001

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Access to Document

10.1016/j.jimonfin.2013.12.001