What Form did Global Financial Integration Take from 1960 to 2015? A Topological Analysis

39 Pages Posted: 22 Jan 2017 Last revised: 1 Feb 2017

Cécile Bastidon

University of Toulon-Var - Laboratory of Economics Applied to Development (LEAD); Ecole Normale Supérieure (ENS) de Lyon - Cliometrics and Complexity

Antoine Parent

Sciences Po Lyon

Date Written: September 1, 2016

Abstract

We propose an original analysis of the second globalization era, using an alternative range of equity prices integration indicators based on the topological structure of world equity markets. The sample includes 32 countries over the period 1960-2015. Particular importance is given to the study of the major stylized fact in the literature, the Lucas paradox, in its different forms including the “allocation” puzzle within emerging economies. This original methodological approach highlights that the second globalization era is characterized by an increasing unpredictability of the structure and dynamics of the system. First, at the end of the study period the most integrated countries are split between advanced economies and emerging economies while some advanced economies are among the least integrated. Secondly, the structure of the network changes from a linear network to a star network, implying a shortening of transmission chains and thus a facilitated diffusion of international price shocks.

Keywords: Lucas paradox, global financial integration, international contagion, equity markets historical dynamics, minimal spanning tree, classification methods

JEL Classification: C65, C82, F36, G15, N20

Suggested Citation

Bastidon, Cécile and Parent, Antoine, What Form did Global Financial Integration Take from 1960 to 2015? A Topological Analysis (September 1, 2016). Available at SSRN: https://ssrn.com/abstract=2902547

Cécile Bastidon (Contact Author)

University of Toulon-Var - Laboratory of Economics Applied to Development (LEAD) ( email )

Avenue de l'Université
La Garde
France

Ecole Normale Supérieure (ENS) de Lyon - Cliometrics and Complexity ( email )

Institut Rhônalpin des Systèmes Complexes (IXXI)
46, allée d'Italie
Lyon, 69007
France

Antoine Parent

Sciences Po Lyon ( email )

14 avenue Berthelot
Lyon, 69007
France

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