Market integration in developed and emerging markets: Evidence from the CAPM
نویسندگان
چکیده
Beta, as measured by the Capital Asset Pricing Model (CAPM), is widely used for pricing stocks, determining the cost of capital, and gauging the extent to which markets are integrated. The CAPM model assumes that equilibrium conditions prevail. The choice of which market portfolio to use in the regression – the home country or global index – depends on the level of global market integration. We present several new empirical observations on the pricing of stocks and market integration. We provide guidance on how practitioners should calculate beta on securities in various developed and emerging markets. © 2008 Elsevier B.V. All rights reserved. JEL classifications: F36 Financial Aspects of Economic Integration; G12 Asset Pricing
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