Financial Integration
- Topics:
- Financial Research
- Tags:
- Asset,
- Asset Management,
- Business Operations,
- Financial,
- Financial Integration,
- National Bureau Of Economic Research,
- Operational Planning,
- S&P 500
FREE Registration is required
Vendor Registration: $ Paid Download
Overview: This paper develops a simple new methodology to test for asset integration and applies it within and between American stock markets. The technique is tightly based on a general intertemporal asset-pricing model, and relies on estimating and comparing expected risk-free rates across assets. Expected risk-free rates are allowed to vary freely over time, constrained only by the fact that they are equal across (risk-adjusted) assets. Assets are allowed to have general risk characteristics, and are constrained only by a factor model of covariances over short time periods. The technique is undemanding in terms of both data and estimation. It was found that expected risk-free rates vary dramatically over time, unlike short interest rates. Further, the S&P 500 market seems to be well integrated, and the NASDAQ is generally (but not always) integrated. However, the NASDAQ is poorly integrated with the S&P 500.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 216KB | Date: Jul 2003 | Pages: 23
