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Financial Market Integration: the Case of France in the Light of Empirical Evidence

In: Tax Harmonization and Financial Liberalization in Europe

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  • Christian Bordes

Abstract

This paper examines the integration of French financial markets from an internal and an external point of view. By integration we mean a situation where two conditions hold: (i) valuation efficiency, a market is said to be efficient if the value of an asset equals the present value of expected future flows of income (Tobin, 1984); (ii) risk pricing equivalence, there exist no obstacles to the trade in financial assets and, therefore, the price required for bearing a given type of risk is the same for all investors and for all segments of a given capital market. In a situation where international integration of financial capital markets is perfect, consumption risks are mutualized. Individual consumption is then linked to global consumption; each individual has the possibility of getting rid of risks which are specific to him, to endure only a part of the global risk — the so-called ‘optimal sharing rule’.

Suggested Citation

  • Christian Bordes, 1992. "Financial Market Integration: the Case of France in the Light of Empirical Evidence," Palgrave Macmillan Books, in: Georg Winckler (ed.), Tax Harmonization and Financial Liberalization in Europe, chapter 15, pages 193-207, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-22008-3_15
    DOI: 10.1007/978-1-349-22008-3_15
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