Retrospective on Faith R. Glazier, “The Canadian Stock Market” from Perspectives on Business and Economics, Volume 5, 1987 Faith R. Glazier ‘87 is a now a Lehigh University Board Member/Retired Deloitte Consulting Partner/ Former Deloitte Consulting Board Member. Glazier argued that although the Canadian and American stock markets are highly correlated, they were not identical. She identified several distinctly Canadian forces shaping the Toronto Stock Exchange (TSE): a heavy concentration in natural resource industries, a fragmented provincial regulatory environment, and a rule limiting pension funds to 10% foreign assets, which she argued produced a "hothouse effect," forcing funds into domestic equities regardless of quality and segmenting Canada from global capital flows. Did trade liberalization close the gap between the US and Canadian markets over time? Glazier predicted that as restrictions on foreign investment were eliminated and the two countries moved toward freer global financial markets, the linkages between the TSE and US markets would deepen. She saw this as both inevitable and, for investors and policymakers, necessary to understand. That prediction proved largely correct. The Canada– United States Free Trade Agreement entered into force on January 1, 1989, with the explicit goal of eliminating tariffs and liberalizing investment conditions between the two countries (Government of Canada, 1988). US and Canadian equity prices were cointegrated only in the post-NAFTA period, confirming that trade liberalization measurably deepened financial market integration (Aggarwal & Kyaw, 2005). However, sector divergence persisted—the difference in sector weights between the S&P/TSX Composite and the S&P 500 continues to emphasize the Canadian market's heavy reliance on natural resources and financial firms relative to the US (TMX Group, 2025). Trade liberalization deepened integration broadly, but did not erase the structural differences Glazier identified. Did the legal barriers, particularly the pension fund foreign property rule, actually get dismantled? Glazier pointed to Canada's foreign property rule as a primary driver of market segmentation, arguing that forcing pension funds to purchase domestic equities created artificial demand and inflated prices for weaker Canadian stocks. She framed the eventual removal of such barriers as a necessary step toward a more rational, globally integrated market. The rule was removed, though the process took nearly two decades after Glazier’s publication. The foreign property limit stood at 10% from 1971, rose to 20% by 1994, 30% by 2001, and was eliminated entirely in 2005 (Robson, 2023; Department of Finance Canada, 2005). The outcome, however, inverted the problem Glazier described. Rather than a hothouse of captive domestic investment, Canadian pension funds began allocating heavily abroad. By March 2025, only 12% of the Canada Pension Plan's $714B portfolio was invested in Canada, its lowest level ever, while 47% was invested in the US, its highest on record (Canada Pension Plan Investment Board, 2025). The foreign property rule was dismantled, but the resulting reallocation has since become its own active policy debate in Canada. References Government of Canada. (1988). Canada–United States Free Trade Agreement Implementation Act, S.C. 1988, c. 65. Aggarwal, R., & Kyaw, N. A. (2005). Equity market integration in the NAFTA region: Evidence from unit root and cointegration tests. International Review of Financial Analysis, 14(4), 393–406. TMX Group. (2025). A look back at 2024 in the lens of S&P/TSX sector indices. Robson, W. B. P. (2023, November 8). Don't limit Canadian investors' access to foreign assets. Financial Post. Department of Finance Canada. (2005). Budget Implementation Act, S.C. 2005, c. 30. Canada Pension Plan Investment Board. (2025). Fiscal 2025 annual results overview. Retrospective by Vini Jaiswal ‘ 26, B.S Industrial and Systems Engineering Martindale Retrospectives 6 July 2026
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