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 (US) |
|---|---|
| Pages (from-to) | 182-196 |
| Number of pages | 15 |
| Journal | Journal of International Money and Finance |
| Volume | 41 |
| DOIs | |
| State | Published - Mar 1 2014 |
| Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
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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