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Financial Market Integration Over the Long Run: Is there a U-shape?

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  • Vadym Volosovych

    ()
    (Department of Economics, College of Business, Florida Atlantic University)

Abstract

I show that the principal components analysis can be used to quantify the degree of economic integration, trace its evolution over time, and capture episodes of market segmentation. Based on long series of sovereign bond data for fifteen industrialized economies I document clear evidence of higher financial markets integration at the end of the 20th century compared to the earlier periods (J -shaped trend with a trough as early as the 1920s). Countries’ sovereign bond markets were much more segmented prior to World War I than in the following periods.

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Bibliographic Info

Paper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 05001.

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Length: 38 pages
Date of creation: Jul 2005
Date of revision: Feb 2007
Handle: RePEc:fal:wpaper:05001

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Keywords: financial markets integration; principal components; sovereign bonds;

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Cited by:
  1. Björn Hagströmer & Richard G. Anderson & Jane M. Binner & Birger Nilsson, 2009. "Dynamics in systematic liquidity," Working Papers 2009-025, Federal Reserve Bank of St. Louis.
  2. Dennis Quinn & Hans-Joachim Voth, 2010. "Free Flows, Limited Diversification: Openness and the Fall and Rise of Stock Market Correlations, 1890-2001," NBER Chapters, in: NBER International Seminar on Macroeconomics 2009, pages 7-39 National Bureau of Economic Research, Inc.

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