Template-Type: ReDIF-Paper 1.0
Author-Name: Cathy Ning
Author-X-Name-First: Cathy
Author-X-Name-Last: Ning
Author-Email: qning@ryerson.ca 
Author-Workplace-Name: Department of Economics, Ryerson University, Toronto, Canada
Author-Name: Stephen Sapp
Author-X-Name-First: Stephen
Author-X-Name-Last: Sapp
Author-Email: ssapp@ivey.uwo.ca.
Author-Workplace-Name: Ivey School of Business, University of Western Ontario, London, Ontario, Canada
Title: Segmentation across International Equity, Bond, and
Foreign Exchange Markets
Abstract: In this paper, we examine the integration of international financial markets. The integration of financial markets across countries and across asset classes is assumed to hold in most empirical studies, but has only been tested for certain countries and certain asset classes. We test for the integration of international equity, bond and foreign exchange markets. Our results indicate that the three classes of assets are segmented. Investigating potential explanations for this segmentation, we find that there are differing degrees of segmentation across these markets and that this is related to the asset returns from each class being explained by different sets of economic risk factors. In pair-wise tests we find that the bond-equity and bond-foreign exchange markets appear to be more segmented than the equity-foreign exchange market.
Classification-JEL: G15; G12
Keywords: Market integration; GMM; Stochastic discount factor models; Hansen and Jagannathan distance
Length: 34 pages
Creation-Date: 2009-11
Number: 010
File-URL: http://economics.ryerson.ca/workingpapers/wp009.pdf
File-Format: Application/pdf
Handle: RePEc:rye:wpaper:wp010