NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Stephan Siegel

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Working Papers

January 2014Political Risk Spreads
with Geert Bekaert, Campbell R. Harvey, Christian T. Lundblad: w19786
We introduce a new, market-based and forward looking measure of political risk derived from the yield spread between a country’s U.S. dollar debt and an equivalent U.S. Treasury bond. We explain the variation in these sovereign spreads with four factors: global economic conditions, country-specific economic factors, liquidity of the country’s bond, and political risk. We then extract the part of the sovereign spread that is due to political risk, making use of political risk ratings. In addition, we provide new evidence that these political risk ratings are predictive, on average, of future risk realizations using data on political risk claims as well as a novel textual-based database of risk realizations. Our political risk spread measure does not make the mistake of double counting syste...
December 2010The European Union, the Euro, and Equity Market Integration
with Geert Bekaert, Campbell R. Harvey, Christian T. Lundblad: w16583
At a time of historic challenges to the viability of the Eurozone, we assess the contribution of the EU and the Euro to equity market integration in Europe. We use a simple and essentially model free measure of bilateral market segmentation: two countries are segmented if there is a wide divergence in the valuations of their industries. We first establish that segmentation is significantly lower for EU versus non- EU members. Bilateral valuation differentials remain lower for EU members even after we control for several possible channels of integration, such as bilateral trade, direct investment positions, financial regulation, and interest rate differences. Importantly, we find that EU membership reduces equity market segmentation between member countries whether or not members have also ...
March 2009What Segments Equity Markets?
with Geert Bekaert, Campbell R. Harvey, Christian Lundblad: w14802
We propose a new, valuation-based measure of world equity market segmentation. While we observe decreased levels of segmentation in many developing countries, the level of segmentation is still significant. In contrast to previous research, we characterize the factors that account for variation in market segmentation both through time as well as across countries. While a country's regulation with respect to foreign capital flows is important in determining its level of segmentation, we find that non-regulatory factors are also related to the cross-sectional and time-series variation in the level of segmentation. We identify a country's political risk profile and its stock market development as two additional local segmentation factors as well as the U.S. corporate credit spread as a global...
December 2004Global Growth Opportunities and Market Integration
with Geert Bekaert, Campbell R. Harvey, Christian Lundblad: w10990
We measure a country's growth opportunities by investigating how its industry mix is priced in global capital markets, using price earnings ratios of global industry portfolios. We derive three sets of empirical results. First, these exogenous growth opportunities strongly predict future changes in real GDP and investment in a large panel of countries. This relation is strongest in countries that have liberalized their capital accounts, equity markets, and banking systems. Second, we re-examine the link between financial development, investor protection, capital allocation, and growth. We find that financial development and investor protection measures are much less important in aligning growth opportunities with growth than is capital market openness. Third, we formulate new tests of mark...

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