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

Abstract

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