Do Market Capitalisation and Stocks Traded Converge? New Global Evidence

In this paper, we examine convergence of stocks markets. Our empirical exercise is based on 12 different panels, including a full panel consisting of 120 countries and disaggregated panels, such as high income, middle income, low income, OECD, CSI, and developing countries. In addition, we used regional panels, such as those representing the Arab States, East Asia and the Pacific, South Asia, Latin America and the Caribbean, and Sub-Saharan Africa. Our main finding is that, based on the conditional convergence model, convergence of stock market capitalization and stocks traded is found for five panels, namely the all country panel, the high and low income panels, the OECD panel, and the Sub-Saharan African panel. The speed of convergence is high, in most cases between 20-30 per cent.