Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148425
Authors: 
Billio, Monica
Donadelli, Michael
Paradiso, Antonio
Riedel, Max
Year of Publication: 
2016
Series/Report no.: 
SAFE Working Paper Series 159
Abstract: 
This paper compares the dynamics of the financial integration process as described by different empirical approaches. To this end, a wide range of measures accounting for several dimensions of integration is employed. In addition, we evaluate the performance of each measure by relying on an established international finance result, i.e., increasing financial integration leads to declining international portfolio diversification benefits. Using monthly equity market data for three different country groups (i.e., developed markets, emerging markets, developed plus emerging markets) and a dynamic indicator of international portfolio diversification benefits, we find that (i) all measures give rise to a very similar long-run integration pattern; (ii) the standard correlation explains variations in diversification benefits as well or better than more sophisticated measures. These Findings are robust to a battery of robustness checks.
Subjects: 
equity market integration
dynamic correlation
principal components
international diversification benefits
JEL: 
F15
F44
G15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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