An entropic approach to equity market integration and consumption-based capital asset pricing models

Teng-Tsai Tu

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This study examines the degree of equity market integration and segmentation domestically and internationally. The conventional method on this literature either is subject to the joint hypothesis test problem or lacks the sampling distribution theory needed to make inferences about the integration hypothesis. To circumvent both problems, this study proposes using the nonparametric entropic approach to test for the market integration hypothesis. The proposed approach also allows us to perform an alternative test of conventional consumption-based capital asset pricing models. Both monthly and quarterly data from December, 1980 through November, 1996 are used for Taiwan and U.S. equity markets. At the industry portfolio level, we find that both equity markets are integrated domestically and internationally. The negligible value of the estimates of segmentation indices provides evidence that the two equity markets are not segmented domestically or internationally. We also find that the power felicity consumption-based capital asset pricing model cannot be rejected separately for these two equity markets.

Date: 1998-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://dr.lib.iastate.edu/server/api/core/bitstre ... a0f098e51ead/content
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:1998010108000012895

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().