International Market Integration: A Survey

Abstract

Market integration is a canonical topic in international finance. The question of whether and to what extent markets are integrated with the global economy has motivated one of the largest literature in this field. Given the vast literature, this survey focuses only on equity market integration and provides an overview of its theoretical and empirical research. It reviews the evolution of various approaches employed in studying market integration. This survey discusses the recent empirical findings on cross-sectional and time-series dynamics of integration across developed and emerging markets. It also describes the empirical estimation of three current measures of market integration and discusses their limitations. Finally, the survey provides a few future directions for this line of research.

Keywords: International Finance, Market Integration, Segmentation