European Financial Integration and Equity Returns: A Theory-Based Assessment

FAME Working Paper No. 84

87 Pages Posted: 23 Jul 2003

See all articles by Kpate Adjaoute

Kpate Adjaoute

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Jean-Pierre Danthine

University of Lausanne - Institute of Banking and Finance (IBF); Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Date Written: January 2003

Abstract

This paper reassesses, at the light of economic and financial theory, the well-documented recent evolution of the euro area public debt and equity markets. Doing so leads to associating the EMU and the single market with the changes in fundamentals and financial integration with convergence in pricing. For the public debt market, we stress the observation, conform with predictions, that risk free interest rates are now less volatile in the euro area. But also the fact that the establishment of a single public debt market is still not completed. The current fragmentation is costly to Treasuries and taxpayers and understanding its cause is important to evaluate the prospects of currently considered measures of financial integration.

Keywords: European financial integration, country and sector effects, asset allocation

JEL Classification: F2, F36, G15

Suggested Citation

Adjaoute, Kpate and Danthine, Jean-Pierre, European Financial Integration and Equity Returns: A Theory-Based Assessment (January 2003). FAME Working Paper No. 84, Available at SSRN: https://ssrn.com/abstract=423160 or http://dx.doi.org/10.2139/ssrn.423160

Kpate Adjaoute

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland
+41 21 729 4711 (Phone)
+41 21 729 4711 (Fax)

Jean-Pierre Danthine (Contact Author)

University of Lausanne - Institute of Banking and Finance (IBF) ( email )

Lausanne, 1015
Switzerland
+41 21 692 3485 (Phone)
+41 21 692 3335 (Fax)

HOME PAGE: http://www.hec.unil.ch/jdanthine/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swiss Finance Institute ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

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