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European capital market integration: An empirical study based on a European asset pricing model

  • Morelli, David
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    This paper investigates the integration between the capital markets of 15 European countries, all of which are members of the European Union. Integration is tested under the joint hypothesis of a European multifactor asset pricing model. A European portfolio is constructed from which common factors are extracted using maximum likelihood factor analysis. Empirical tests are undertaken to determine whether these European factors are not only priced, but also equally priced across the European capital markets. The results show that a number of common factors are extracted from the European portfolio and a degree of capital market integration is shown to exist across the European capital markets.

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    File URL: http://www.sciencedirect.com/science/article/B6VGT-4YRPDSK-1/2/d6affc39ee3bf5e83e5eb1485176ef27
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    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 20 (2010)
    Issue (Month): 4 (October)
    Pages: 363-375

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    Handle: RePEc:eee:intfin:v:20:y:2010:i:4:p:363-375
    Contact details of provider: Web page: http://www.elsevier.com/locate/intfin

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    1. Gultekin, Mustafa N & Gultekin, N Bulent & Penati, Alessandro, 1989. " Capital Controls and International Capital Market Segmentation: The Evidence from the Japanese and American Stock Markets," Journal of Finance, American Finance Association, vol. 44(4), pages 849-69, September.
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    7. Swanson, Peggy E., 2003. "The interrelatedness of global equity markets, money markets, and foreign exchange markets," International Review of Financial Analysis, Elsevier, vol. 12(2), pages 135-155.
    8. Corhay, A. & Tourani Rad, A. & Urbain, J. -P., 1993. "Common stochastic trends in European stock markets," Economics Letters, Elsevier, vol. 42(4), pages 385-390.
    9. Heston, Steven L. & Rouwenhorst, K. Geert & Wessels, Roberto E., 1995. "The structure of international stock returns and the integration of capital markets," Journal of Empirical Finance, Elsevier, vol. 2(3), pages 173-197, September.
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