Limits to international arbitrage: an empirical evaluation
AbstractThis paper studies international financial integration by testing the law of one price across national borders. We use the distance between national discount factors as an integration measure and analyze the level of cross-border mispricing. The empirical analysis shows that pricing differentials are relatively large in economic terms. This lack of international financial integration is subsequently analyzed in the market micro-finance literature. We find that market characteristics explain a considerable part of the variance in our cross-section of pricing differentials. Copyright © 2007 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.
Volume (Year): 12 (2007)
Issue (Month): 3 ()
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Web page: http://www.interscience.wiley.com/jpages/1076-9307/
Other versions of this item:
- Hans Dewachter & Kristien Smedts, 2004. "Limits to International Arbitrage: an Empirical Evaluation," Center for Economic Studies - Discussion papers ces0401, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Dewachter, Hans & Smedts, Kristien, 2004. "Limits to international arbitrage: An empirical evaluation," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/121543, Katholieke Universiteit Leuven.
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