How Much Globalization Is There in the World Stock Markets and Where Is It?

Abstract

The effects of globalization in the world economy, and its role within financial markets, were widely analysed in the literature (Shahrokhi, 1998; Aggarwal, 1999; Kearney and Poti, 2006; Eun and Lee, 2010; Aggarwal et al., 2010). The pros and cons of international economic and financial framework, featured by common trends and higher similarities, were considered from different perspectives. Moreover, different concepts and definitions of globalization were provided as well. In the literature, the hypothesis that globalization is growing within world economies is commonly adopted by many scholars, however, there are only a few papers that tried to analyse this phenomenon in a comprehensive manner. Thus, if the presence of globalization in financial markets could be considered as commonplace, the need to evaluate the relevance and the developing path of this phenomenon is quite clear. In this paper, the authors try to fill this gap, providing both (1) a measure of globalization within financial markets around the world in order to understand the main trends, and (2) an analysis of single geographical areas in order to understand if globalization is developing as a homogeneous phenomenon or if, on the contrary, globalization effects are stronger in some stock markets than in others.