Time-Varying World Market Integration / Geert Bekaert, Campbell R. Harvey.

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Bekaert, Geert

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4843.Publication details: Cambridge, Mass. National Bureau of Economic Research 1994.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We propose a conditional measure of capital market integration that allows us to characterize both the cross-section and time-series of expected returns in developed and emerging markets. Our measure, which arises from a conditional regime-switching model, allows us to describe expected returns in countries that are segmented from world capital markets in one part of the sample and become integrated later in the sample. Our results suggest that a number of emerging markets exhibit time-varying integration. Interestingly, some markets appear to be more integrated than one might expect based on prior knowledge of investment restrictions. Other markets appear segmented even though foreigners have relatively free access to their capital markets.

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Previous	nber w4840 Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach /	nber w4841 Bias in U.S. Import Prices and Demand /	nber w4842 Passthrough of Exchange Rates and Purchasing Power Parity /	nber w4843 Time-Varying World Market Integration /	nber w4844 Investment in U.S. Education and Training /	nber w4845 Infrastructure and Public R&D Investments, and the Growth of Factor Productivity in US Manufacturing Industries /	nber w4846 Differences in the Uses and Effects of Antidumping Law Across Import Sources /	Next

August 1994.

We propose a conditional measure of capital market integration that allows us to characterize both the cross-section and time-series of expected returns in developed and emerging markets. Our measure, which arises from a conditional regime-switching model, allows us to describe expected returns in countries that are segmented from world capital markets in one part of the sample and become integrated later in the sample. Our results suggest that a number of emerging markets exhibit time-varying integration. Interestingly, some markets appear to be more integrated than one might expect based on prior knowledge of investment restrictions. Other markets appear segmented even though foreigners have relatively free access to their capital markets.