Faculty Scholarship 1994 - Present

Common Information in a Common Market? Variance Changes in European Capital Markets

International trade theory shows the benefits to countries from creating a single, unified market for goods and services. International financial theory has demonstrated similar benefits for the integration of capital markets. This theory also argues that integrated markets are priced using common information. In this study, we search twelve European markets for breakpoints in the way assets are priced and correlate these dates to events in each country. Our analysis shows that the events are related primarily to domestic events, not pan-European events. We conclude that domestic factors cannot be ignored even when markets are integrated.