The European Union, the Euro, and Equity Market Integration

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

No 16583, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: At a time of historic challenges to the viability of the Eurozone, we assess the contribution of the EU and the Euro to equity market integration in Europe. We use a simple and essentially model free measure of bilateral market segmentation: two countries are segmented if there is a wide divergence in the valuations of their industries. We first establish that segmentation is significantly lower for EU versus non- EU members. Bilateral valuation differentials remain lower for EU members even after we control for several possible channels of integration, such as bilateral trade, direct investment positions, financial regulation, and interest rate differences. Importantly, we find that EU membership reduces equity market segmentation between member countries whether or not members have also adopted the Euro. The Euro adoption as well as the anticipation of the Euro adoption has minimal effects on market integration.

JEL-codes: F30 F31 F33 G15 (search for similar items in EconPapers)
Date: 2010-12
New Economics Papers: this item is included in nep-eec, nep-eur and nep-ifn
Note: AP IFM
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Citations: View citations in EconPapers (7)

Published as Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian T. & Siegel, Stephan, 2013. "The European Union, the Euro, and equity market integration," Journal of Financial Economics, Elsevier, vol. 109(3), pages 583-603.

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Related works:
Journal Article: The European Union, the Euro, and equity market integration (2013)
Working Paper: The European Union, the Euro, and Equity Market Integration (2011)
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