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Equity Returns and Integration: Is Europe Changing?

Author

Listed:
  • Kpate ADJAOUTE

    (HSBC Private Bank (Suisse) SA and FAME)

  • Jean-Pierre DANTHINE

    (HEC-University of Lausanne, CEPR and FAME)

Abstract
This paper analyses the consequences of the process of financial and economic integration on European equity markets. It documents significant changes in fundamentals, notably an increased synchronisation of macroeconomic activities, and a non-negligible evolution in pricing, with a decrease in the cost of capital and converging equity premia. As to equity returns themselves, in the face of what could turn out to be long run upward trends in the correlations among both country and sector returns and a narrowing of the superiority of country factors, the stakes of searching for diversification opportunities at a higher level of disaggregation appear to be higher than ever.

Suggested Citation

  • Kpate ADJAOUTE & Jean-Pierre DANTHINE, 2004. "Equity Returns and Integration: Is Europe Changing?," FAME Research Paper Series rp117, International Center for Financial Asset Management and Engineering.
    • Handle: RePEc:fam:rpseri:rp117
    as

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    File URL: http://www.swissfinanceinstitute.ch/rp117.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    European integration; Equity markets; Diversification;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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