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Segmentation across International Equity, Bond, and Foreign Exchange Markets

Author

Listed:
  • Cathy Ning

    (Department of Economics, Ryerson University, Toronto, Canada)

  • Stephen Sapp

    (Ivey School of Business, University of Western Ontario, London, Ontario, Canada)

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.

Suggested Citation

  • Cathy Ning & Stephen Sapp, 2009. "Segmentation across International Equity, Bond, and Foreign Exchange Markets," Working Papers 010, Toronto Metropolitan University, Department of Economics.
    • Handle: RePEc:rye:wpaper:wp010
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    References listed on IDEAS

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    More about this item

    Keywords

    Market integration; GMM; Stochastic discount factor models; Hansen and Jagannathan distance;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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    This paper has been announced in the following NEP Reports:

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