Limits to International Arbitrage: an Empirical Evaluation
AbstractThis paper studies international financial integration by testing the law of one price across national borders. We extend the methodology as proposed by Chen and Knez (1995) to an international environment and analyze the level of cross-border mispricings. The empirical analysis shows that pricing errors are relatively large. This lack of international financial integration is subsequently analyzed in the market micro-finance literature. We find that micro-factors explain a considerable part of the variance in cross-border pricing errors.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0401.
Date of creation: Mar 2004
Date of revision:
Other versions of this item:
- Hans Dewachter & Kristien Smedts, 2007. "Limits to international arbitrage: an empirical evaluation," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(3), pages 273-285.
- 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.
- NEP-ALL-2008-04-12 (All new papers)
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