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Title: |
Financial Integration and Market Efficiency: Some International Evidence
from Cointegration Tests |
| Author: |
Yuhn, Ky-Hyang |
| Author
Affiliation: |
FL Atlantic U |
| Source: |
International Economic Journal, Summer 1997, v. 11, no. 2, pp. 103-116 |
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Publication Date: |
Summer 1997 |
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Abstract: |
This study investigates whether the
globalization of financial markets enhances the efficiency of national
stock markets. To this end, we have developed a dynamic representation
of cointegration which is consistent with the hypothesis that stock
prices reflect the efficient discounting of new information on market
fundamentals and tested for market efficiency in five industrialized
markets (the United States, Canada, Japan, the United Kingdom, and
Germany) over the last two decades. Our empirical analysis indicates
that the U.S. and Canadian stock markets obey the long-run equilibrium
path implied by our dynamic cointegration model, but the Japanese,
British, and German markets do not exhibit such characteristics. Thus,
it can be claimed that the stock markets of the United States and Canada
are informationally efficient, whereas those of Japan, the United
Kingdom, and Germany are not. |
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