Are Stock Markets Integrated? Evidence from a Partially Segmented ICAPM with Asymmetric Effects.

In this paper, we test a partially segmented ICAPM for two developed markets, two emerging markets and World market, using an asymmetric extension of the multivariate GARCH process of De Santis and Gerard (1997,1998). We find that this asymmetric process provides a significantly better fit of the data than a standard symmetric process. The evidence obtained from the whole period and sub-periods analysis supports the financial integration hypothesis and suggests that domestic risk is not a priced factor.

FInancial Integration and Interenational Portfolio Diversification : A Multivariate Analysis

In this article, we extend the conditional ICAPM of De Santis and Gérard (1997,1998) using an asymmetric multivariate GARCH specification. This approach, with double asymmetric effects, allows to the risk premia, betas and correlations to vary through time. Then, we investigate ex ante benefits from world market diversification. The evidence supports the financial integration hypothesis and suggests that investors from all countries could expect statistically significant benefits from international diversification but that gains are considerable larger for investors with smaller home markets.

Arbitrage and Dynamic Asset Pricing

This paper investigates the determinants of stock returns in the French stock market in an Arbitrage Pricing Theory framework. The analysis is conducted with monthly data from the French stock market over the period 1990-2001. Financial theory predicts that a set of macroeconomic variables systematically affect stock market returns such as : industrial production, expected and unexpected inflation, the spread between long and short interest rates and unemployment rate. We estimate the regressions using the Kalman filter, under the hypothesis that the agent's expectations are adaptive rather than rational. This method allows us also to work under the more realistic assumption of time-varying sensitivities and risk premium. We find that a two to four- factor structure is appropriate to explain stock returns. The results also show that the factor structure changes from an equity to an other.

International Asset Pricing and World Market Integration : Evidence from a Partially Integrated ICAPM with Asymmetric Effects.

This paper tests a partially Segmented ICAPM using an asymmetric multivariate GARCH specification for two developed markets, two emerging markets and World market. We find that this asymmetric process provides a significantly better fit of the data than a standard symmetric process. The evidence supports the financial integration hypothesis and suggests that domestic risk is not a priced factor.Financial Integration, Segmentation, ICAPM, Multivariate GARCH

The Impact of Increasing Stock Market Integration on Expected Gains from International Portfolio Diversification: Evidence from a Multivariate Approach with Time Varying Risk.

This paper tests a conditional International Asset Pricing Model (ICAPM) using an asymmetric multivariate GARCH specification and investigates evolutions of ex ante benefits from world market diversification. The model is estimated simultaneously for 8 markets: the world market, 4 developed markets and 3 emerging markets. This approach allows to the price of market risk, betas and correlations to vary through time. The evidence supports the financial integration hypothesis and suggests that investors from all countries could expect statistically significant benefits from international diversification but that gains are considerably larger for investors with smaller home markets

On the influence of oil prices on stock markets: Evidence from panel analysis in GCC countries.

This paper implements recent bootstrap panel cointegration techniques and Seemingly Unrelated regression (SUR) methods to investigate the existence of a long-run relationship between oil prices and Gulf Corporation Countries (GCC) stock markets. Since GCC countries are major world energy market players, their stock markets are likely to be susceptible to oil price shocks. Using two different (weekly and monthly) datasets covering respectively the periods from 7 June 2005 to 21 October 2008, and from January 1996 to December 2007, our investigation shows that there is evidence for cointegration of oil prices and stock markets in GCC countries, while the SUR results indicate that oil price increases have a positive impact on stock prices, except in Saudi Arabia.http://deepblue.lib.umich.edu/bitstream/2027.42/64426/1/wp961.pd

A la Recherche des Facteurs Déterminants de l'Intégration Internationale des Marchés Boursiers : une Analyse sur Données de Panel

The aim of this paper is to identify the determinants of international stock markets integration. Intuitively we selected a great number of factors linked to financial integration. Then, we developed an international asset-pricing model with time-varying degree of integration. This model is estimated for 30 countries (10 developed countries and 20 emerging countries) using panel data econometrics. In order to investigate whether the financial integration in emerging markets and that in developed markets react differently to the economic and financial innovations, we estimated the model as well jointly for all markets as separately for developed markets and emerging markets. Our results show that trade openness exerts a positive effect on financial integration across all markets, the global factors drive integration in developed markets whereas the factors related to economic and political stability affect financial integration in emerging markets.