Emerging Markets Are Catching Up: Economic or Financial Integration?

Forthcoming, Journal of Financial and Quantitative Analysis

40 Pages Posted: 23 Aug 2017 Last revised: 19 May 2019

See all articles by Amir Akbari

Amir Akbari

Ontario Tech. University

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

Bruno Solnik

Hong Kong University of Science & Technology (HKUST) - Department of Finance ; HEC Paris - Departement Finance et Economie

Date Written: February 12, 2019

Abstract

We propose a simple metric to measure two aspects of market integration, namely economic integration (defined as a common cash flow dynamic) and financial integration (defined as a common risk pricing dynamic) and then examine their evolution through time while controlling for volatility. We find that developed (DEV) countries exhibit greater degrees of financial and economic integration than emerging (EMG) markets. While the financial integration gap between these markets remains large throughout the sample period, the EMG economies are catching up with their DEV counterparts in recent years -- their level of economic integration has reached that of DEV countries.

Keywords: Financial Integration, Economic Integration, Cash Flow and Risk Pricing Revisions, Analyst Forecasts

JEL Classification: F15, F30, G15, E44

Suggested Citation

Akbari, Amir and Ng, Lilian and Solnik, Bruno, Emerging Markets Are Catching Up: Economic or Financial Integration? (February 12, 2019). Forthcoming, Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=3024192 or http://dx.doi.org/10.2139/ssrn.3024192

Amir Akbari (Contact Author)

Ontario Tech. University ( email )

2000 Simcoe Street North
Oshawa, Ontario L1H 7K4
Canada

HOME PAGE: http://www.amir-akbari.com

Lilian Ng

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Bruno Solnik

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

HEC Paris - Departement Finance et Economie ( email )

1, rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
+33 1 39 67 72 84 (Phone)
+33 1 39 67 70 85 (Fax)

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