Stabsseminar ved Richard Priestley

Associate Professor ved BI, Richard Priestley, holder stabsseminar ved Institutt for foretaksøkonomi fredag 5. november.

Tema er EMU and European Stock Market Integration
Tid og sted:
Fredag 5.november kl. 1215-1330 i møterommet, 9. etasje

Abstract
The paper examines whether or not the convergence process of European economies towards Economic and Monetary Union has led to increased integration of European stock markets. We estimate a conditional asset
pricing model, which allows for a time-varying degree of integration that measures the importance of EU-wide risk rela-tive to country-specific risk. The model accounts for intra-European currency
risk, time-varying quantities of risk and time-varying prices of risk. The results indicate that the degree of integration is closely related to forward interest differentials vis-a-vis Germany, i.e. to the probability of a country joining EMU. Integration increases sub-stantially over time, especially since 1995, when these
differentials began shrinking, and by mid-1998, six months before the official date for EMU launch, stock markets in EMU member states seem to be almost fully integrated. The average saving in the cost of capital
from integration in Europe over the period 1992-1998 is estimated at around 2%.

Paper kan hentes hos Turid Gabrielsen (284) på rom C512, eller ved henvendelse på epost.