Market integration in developed and emerging markets: Evidence from the CAPM

Robert F. Bruner, Wei Li, Mark Kritzman, Simon Myrgren and Sébastien Page

Emerging Markets Review, 2008, vol. 9, issue 2, 89-103

Abstract: Beta, as measured by the Capital Asset Pricing Model (CAPM), is widely used for pricing stocks, determining the cost of capital, and gauging the extent to which markets are integrated. The CAPM model assumes that equilibrium conditions prevail. The choice of which market portfolio to use in the regression - the home country or global index - depends on the level of global market integration. We present several new empirical observations on the pricing of stocks and market integration. We provide guidance on how practitioners should calculate beta on securities in various developed and emerging markets.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:9:y:2008:i:2:p:89-103

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