A measure of stock market integration for developed and emerging markets

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90 Scopus citations


A wide array of official capital controls across countries makes it difficult to perform cross-sectional analysis of the effects of market segmentation. This article constructs a measure of deviations from capital market integration that can be consistently applied across countries. It measures the deviations of asset returns from an equilibrium model of returns constructed assuming market integration. Applying the measure to stock returns from twenty-four national markets indicates that market segmentation tends to be much larger for emerging markets than for developed markets, and that the measure tends to decrease over time. Along several dimensions, the proposed measure yields results that are consistent with reasonable priors about the relations between effective integration and explicit capital controls, capital market development, and economic growth.

Original languageEnglish (US)
Pages (from-to)267-289
Number of pages23
JournalWorld Bank Economic Review
Issue number2
StatePublished - May 1996

ASJC Scopus subject areas

  • Accounting
  • Development
  • Finance
  • Economics and Econometrics


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