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I thank Roland Daumont, Nicola Fuchs-Schündeln, Hyginus Leon, Paolo Mauro, Roberto Garcia-Saltos, and Sunil Sharma for helpful discussions.
The planning horizon would be influenced by the average age of stockholders relative to life expectancy. A shorter planning horizon would tend to increase the wealth effect.
Equity returns for Indonesia only start in 1989.
Qualitative results and policy implications of this paper remain unchanged, if a total return index expressed in local currency is used.
Higher frequency data are available for financial variables but for the countries under consideration most macroeconomic variables are only available on an annual basis.
The fundamentals included were GDP growth, broad money growth, domestic inflation, credit ratings, and trade openness.
A split of the sample into regional subgroups or, according to stock market size, broader stock markets, and countries with small stock did not lead to conclusive results. This may reflect that the stock market structure differs significantly across countries.