Segmentation across International Equity, Bond, and Foreign Exchange Markets
AbstractIn this paper, we examine the integration of international financial markets. The integration of financial markets across countries and across asset classes is assumed to hold in most empirical studies, but has only been tested for certain countries and certain asset classes. We test for the integration of international equity, bond and foreign exchange markets. Our results indicate that the three classes of assets are segmented. Investigating potential explanations for this segmentation, we find that there are differing degrees of segmentation across these markets and that this is related to the asset returns from each class being explained by different sets of economic risk factors. In pair-wise tests we find that the bond-equity and bond-foreign exchange markets appear to be more segmented than the equity-foreign exchange market.
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Bibliographic InfoPaper provided by Ryerson University, Department of Economics in its series Working Papers with number 010.
Length: 34 pages
Date of creation: Nov 2009
Date of revision:
Market integration; GMM; Stochastic discount factor models; Hansen and Jagannathan distance;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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