TY - JOUR AU - Bekaert,Geert AU - Harvey,Campbell R. AU - Lundblad,Christian AU - Siegel,Stephan TI - Global Growth Opportunities and Market Integration JF - National Bureau of Economic Research Working Paper Series VL - No. 10990 PY - 2004 Y2 - December 2004 UR - http://www.nber.org/papers/w10990 L1 - http://www.nber.org/papers/w10990.pdf N1 - Author contact info: Geert Bekaert Graduate School of Business Columbia University 3022 Broadway, 411 Uris Hall New York, NY 10027 Tel: 212/854-9156 Fax: 212/662-8474 E-Mail: gb241@columbia.edu Campbell R. Harvey Duke University Fuqua School of Business Durham, NC 27708-0120 Tel: 919/660-7768 Fax: 919/660-8030 E-Mail: cam.harvey@duke.edu Christian Lundblad Department of Finance University of North Carolina at Chapel Hill Chapel Hill, NC 27599-3490 Tel: 919-962-8441 Fax: 707-371-7060 E-Mail: Christian_Lundblad@unc.edu Stephan Siegel University of Washington Michael G. Foster School of Business 430 PACCAR Hall Box 353226 Seattle, WA 98195-3226 Tel: 206.543.0784 Fax: 206.543.7472 E-Mail: ss1110@u.washington.edu AB - 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 market integration and segmentation. Under integration, the difference between a country's local PE ratio and its global counterpart should not predict relative growth, but the difference between its "exogenous" global PE ratio and the world market PE ratio should predict relative growth. ER -