Dating the Integration of World Equity Markets
Coauthor(s): Campbell Harvey, Robin Lumsdaine.
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Regulatory changes that appear comprehensive will have little impact on the functioning of
a developing market if they fail to lead to foreign portfolio inflows. We specify a reduced-form
model for a number of financial time series and search for a common, endogenous break in the
data generating process. We also estimate a confidence interval for the break. Our endogenous
break dates are accurately estimated but do not always correspond closely to dates of official
capital market reforms. Indeed, the endogenous dates are usually later than official dates,
highlighting the important distinction between market liberalization and market integration.
Source: Journal of Financial Economics
Bekaert, Geert, Campbell Harvey, and Robin Lumsdaine. "Dating the Integration of World Equity Markets." Journal of Financial Economics 65 (2002): 203-47.