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Industry Risk and Market Integration

43 Pages Posted: 11 Jan 2001  

Francesca Carrieri

McGill University - Desautels Faculty of Management

Sergei Sarkissian

McGill University; Yerevan State University

Vihang R. Errunza

McGill University - Desautels Faculty of Management

Date Written: July 2003

Abstract

Traditionally, integration has been studied at the country level. With increasing economic integration, industrial reorganization, and blurring of national boundaries (e.g., EU), it is important to investigate global integration at the industry level. We argue that country-level integration (segmentation) does not preclude industry-level segmentation (integration). Indeed, our results suggest that a country is integrated with (segmented from) the world capital markets only if most of her industries are integrated (segmented). We also show that although global industry risk is small, it can be priced for certain industries. Industries that are priced differently from either the world or domestic markets represent incremental opportunities for international diversification.

Keywords: Imperfect industry integration, Global industry risk, Conditional asset pricing, Portfolio diversification

JEL Classification: G11, G12, G15

Suggested Citation

Carrieri, Francesca and Sarkissian, Sergei and Errunza, Vihang R., Industry Risk and Market Integration (July 2003). Available at SSRN: https://ssrn.com/abstract=255779 or http://dx.doi.org/10.2139/ssrn.255779

Francesca Carrieri

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-1582 (Phone)
514-398-3876 (Fax)

Sergei Sarkissian (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

Yerevan State University

1 Alex Manoogian Street
Yerevan, 0025
Armenia

Vihang R. Errunza

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-4056 (Phone)
514-398-3876 (Fax)

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