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Equity Returns and Integration: Is Europe Changing?

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Author Info

  • Kpate ADJAOUTE

    (HSBC Private Bank (Suisse) SA and FAME)

  • Jean-Pierre DANTHINE

    (HEC-University of Lausanne, CEPR and FAME)

Abstract

This paper analyses the consequences of the process of financial and economic integration on European equity markets. It documents significant changes in fundamentals, notably an increased synchronisation of macroeconomic activities, and a non-negligible evolution in pricing, with a decrease in the cost of capital and converging equity premia. As to equity returns themselves, in the face of what could turn out to be long run upward trends in the correlations among both country and sector returns and a narrowing of the superiority of country factors, the stakes of searching for diversification opportunities at a higher level of disaggregation appear to be higher than ever.

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Bibliographic Info

Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp117.

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Date of creation: Oct 2004
Date of revision:
Handle: RePEc:fam:rpseri:rp117

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Keywords: European integration; Equity markets; Diversification;

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References

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  1. Ormerod, Paul & Mounfield, Craig, 2002. "The convergence of European business cycles 1978–2000," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 307(3), pages 494-504.
  2. Dušan Isakov & Frédéric Sonney, 2003. "Are practitioners right? On the relative importance of industrial factors in international stock returns," FAME Research Paper Series rp72, International Center for Financial Asset Management and Engineering.
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Citations

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Cited by:
  1. Iulia Siedschlag, 2008. "Macroeconomic Differentials and Adjustment in the Euro Area," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  2. Christiansen, Charlotte & Ranaldo, Angelo, 2009. "Extreme coexceedances in new EU member states' stock markets," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1048-1057, June.
  3. Colm Kearney & Valerio Poti, 2005. "Correlation Dynamics in European Equity Markets," Finance 0507008, EconWPA.
  4. Agustín S. Bénétrix and Sébastien Wälti, 2008. "Indicators of regional financial integration," The Institute for International Integration Studies Discussion Paper Series iiisdp243, IIIS.
  5. Gianni De Nicoló & Alexander F. Tieman, 2006. "Economic Integration and Financial Stability," IMF Working Papers 06/296, International Monetary Fund.
  6. Iryna V. Ivaschenko & Gianni De Nicoló, 2008. "Financial Integration and Risk-Adjusted Growth Opportunities," IMF Working Papers 08/126, International Monetary Fund.
  7. De Nicolò, Gianni & Juvenal, Luciana, 2014. "Financial integration, globalization, and real activity," Journal of Financial Stability, Elsevier, vol. 10(C), pages 65-75.
  8. Gianni De Nicolò & Luciana Juvenal, 2010. "Financial integration and risk-adjusted growth opportunities: a global perspective," Working Papers 2010-012, Federal Reserve Bank of St. Louis.
  9. Robert-Paul Berben & W. Jos Jansen, 2005. "Bond Market and Stock Market Integration in Europe," DNB Working Papers 060, Netherlands Central Bank, Research Department.

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