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Industry Risk and Market Integration

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Author Info

  • Francesca Carrieri

    ()
    (Faculty of Management, McGill University, Montréal, Quebec, Canada H3A1G5)

  • Vihang Errunza

    ()
    (Faculty of Management, McGill University, Montréal, Quebec, Canada H3A1G5)

  • Sergei Sarkissian

    ()
    (Faculty of Management, McGill University, Montréal, Quebec, Canada H3A1G5)

Abstract

Traditionally, integration has been studied at the country level. With increasing economic integration, industrial reorganization, and blurring of national boundaries (e.g., European Union (EU)), it is important to investigate global integration at the industry level. We argue that country-level integration (segmentation) does not preclude industry-level segmentation (integration). Indeed, our results suggest that a country is integrated with (segmented from) the world capital markets only if most of her industries are integrated (segmented). We also show that although global industry risk is small, it can be priced for certain industries. Industries that are priced differently from either the world or domestic markets represent incremental opportunities for international diversification.

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File URL: http://dx.doi.org/10.1287/mnsc.1030.0184
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 50 (2004)
Issue (Month): 2 (February)
Pages: 207-221

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Handle: RePEc:inm:ormnsc:v:50:y:2004:i:2:p:207-221

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Related research

Keywords: imperfect industry integration; global industry risk; conditional asset pricing; industry information variables; portfolio diversification;

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