European capital market integration: An empirical study based on a European asset pricing model

David Morelli

Journal of International Financial Markets, Institutions and Money, 2010, vol. 20, issue 4, 363-375

Abstract: This paper investigates the integration between the capital markets of 15 European countries, all of which are members of the European Union. Integration is tested under the joint hypothesis of a European multifactor asset pricing model. A European portfolio is constructed from which common factors are extracted using maximum likelihood factor analysis. Empirical tests are undertaken to determine whether these European factors are not only priced, but also equally priced across the European capital markets. The results show that a number of common factors are extracted from the European portfolio and a degree of capital market integration is shown to exist across the European capital markets.

Keywords: European; capital; markets; Integration; Factor; analysis; Pricing; model (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:20:y:2010:i:4:p:363-375

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