European capital market integration: An empirical study based on a European asset pricing model |
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| Authors: | David Morelli |
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| Affiliation: | 1. Birmingham City University, Department of Accountancy and Finance, Business School, The Curzon Building, 4 Cardigan Street, Birmingham, B4 7BD, United Kingdom;2. Robert Gordon University, Department of Accounting and Finance, Aberdeen Business School, Garthdee Road, Aberdeen, AB10 7QE, United Kingdom;1. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Chengdu, China;2. Shenzhen Research Institute, The Chinese University of Hong Kong, Shenzhen, China;3. College of Public Administration, Zhejiang University, Hangzhou, China;4. Changsheng Fund Management, Beijing, China;1. University of Chicago Booth School of Business, United Statesn;2. Tuck School of Business, Dartmouth College, United Statesn;1. University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu Street, District 3, Ho Chi Minh City, Viet Nam;2. CFVG, University of Economics Ho Chi Minh City, 91 Ba Thang Hai Street, District 10, Ho Chi Minh City, Viet Nam;3. Institute of Business Research, University of Economics, 59C Nguyen Dinh Chieu Street, District 3, Ho Chi Minh City, Viet Nam |
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| Abstract: | This paper investigates the integration between the capital markets of 15 European countries, all of which are members of the European Union. Integration is tested under the joint hypothesis of a European multifactor asset pricing model. A European portfolio is constructed from which common factors are extracted using maximum likelihood factor analysis. Empirical tests are undertaken to determine whether these European factors are not only priced, but also equally priced across the European capital markets. The results show that a number of common factors are extracted from the European portfolio and a degree of capital market integration is shown to exist across the European capital markets. |
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