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Culture, Globalization, and Stock Price Volatility

The primary purpose of this paper is to examine the impact of culture on stock price volatility. The focal causal chain links dimensions of culture (i.e., linguistic structure and values) to globalization to the volatility of prices in 50 stock markets around the world. Other explanatory variables included in the model are characteristics of individual stock markets (age and market capitalization) and countries (per capita income and population). Partial least square regression is used to estimate the parameters of a comprehensive model using stock price volatility as the dependent variable. Our findings suggest that stock price volatility is influenced by both aspects of culture included in the study. While the linguistic influence was found to be direct, the influence of cultural values was found to be mediated by the extent of globalization of the countries. The generality of our theory is supported by our analyses of the volatility of prices for other categories of consumer purchases as well.