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A Test for Increased Capital Market Integration
Author(s) -
Alford Alan,
Folks William R.
Publication year - 1996
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1996.tb00861.x
Subject(s) - numéraire , economics , currency , dimension (graph theory) , econometrics , test (biology) , differential (mechanical device) , capital market , investment (military) , capital (architecture) , financial economics , monetary economics , finance , mathematics , engineering , history , paleontology , archaeology , politics , political science , law , pure mathematics , biology , aerospace engineering
This study examines the pricing of assets under differential ownership restrictions. A model is developed which yields a coefficient of integration that is dimension free and is directly related to the strength of all barriers to international investment. These characteristics enable an intertemporal comparison of the level of capital market integration. The model is then used to test the hypothesis of increased capital market integration over time. Using data from Morgan Stanley Capital International and analyzing them with the non‐parametric Page test, support is found for this hypothesis. The results are robust to the currency numeraire used.