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The European Union, the Euro, and equity market integration

Geert Bekaert (), Campbell Harvey (), Christian Lundblad and Stephan Siegel ()

Journal of Financial Economics, 2013, vol. 109, issue 3, 583-603

Abstract: We use industry valuation differentials across European countries to study the impact of membership in the European Union as well as the Eurozone on both economic and financial integration. In integrated markets, discount rates and expected growth opportunities should be similar within one industry, irrespective of the country, implying narrowing valuation differentials as countries become more integrated. Our analysis of the 1990–2007 period shows that membership in the EU significantly lowered discount rate and expected earnings growth differentials across countries. In contrast, the adoption of the Euro was not associated with increased integration. Our results do not change when the sample is extended to include the recent crisis period.

Keywords: European Union; Euro; Equity market integration; Valuation differential (search for similar items in EconPapers)
JEL-codes: F36 F21 F30 G15 (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: The European Union, the Euro, and Equity Market Integration (2011) Downloads
Working Paper: The European Union, the Euro, and Equity Market Integration (2010) Downloads
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