NBER WORKING PAPER SERIES ARE FINANCIAL ASSETS PRICED LOCALLY OR GLOBALLY? G.Andrew Karolyi Rene M.Stulz Working Paper 8994 http://www.nber.org/papers/w8994 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge,MA 02138 June 2002 Prepared for the Handbook of the Economics of Finance,George Constantinides,Milton Harris,and Rene M.Stulz,eds.,North-Holland.We are grateful to Dong Lee and Boyce Watkins for research assistance,and to Michael Adler,Kee-Hong Bae,Warren Bailey,Soehnke Bartram,Laura Bottazzi,Magnus Dahlquist, Craig Doidge,Cheol Eun,Vihang Errunza,Jeff Frankel,Thomas Gehrig,John Griffin,Cam Harvey,Mervyn King,Paul O'Connell,Sergio Schmukler,Ravi Schukla,Enrique Sentana,Bruno Solnik,Christof Stahel, Lars Svensson,Linda Tesar,Frank Warnock,and Simon Wheatley for comments.The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. 2002 by G.Andrew Karolyi and Rene M.Stulz.All rights reserved.Short sections oftext,not to exceed two paragraphs,may be quoted without explicit permission provided that full credit,including notice,is given to the source.NBER WORKING PAPER SERIES ARE FINANCIAL ASSETS PRICED LOCALLY OR GLOBALLY? G. Andrew Karolyi René M. Stulz Working Paper 8994 http://www.nber.org/papers/w8994 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 June 2002 Prepared for the Handbook of the Economics of Finance, George Constantinides, Milton Harris, and René M. Stulz, eds., North-Holland. We are grateful to Dong Lee and Boyce Watkins for research assistance, and to Michael Adler, Kee-Hong Bae, Warren Bailey, Soehnke Bartram, Laura Bottazzi, Magnus Dahlquist, Craig Doidge, Cheol Eun, Vihang Errunza, Jeff Frankel, Thomas Gehrig, John Griffin, Cam Harvey, Mervyn King, Paul O’Connell, Sergio Schmukler, Ravi Schukla, Enrique Sentana, Bruno Solnik, Christof Stahel, Lars Svensson, Linda Tesar, Frank Warnock, and Simon Wheatley for comments. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research. © 2002 by G. Andrew Karolyi and René M. Stulz. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source