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Journal of Economic Integration 2003 September;18(3) :433-465.
Capital Market Integration and Industrial Structure: The Case of Australia, Canada and the United States

Robert W. Faff Usha R. Mittoo 

Monash University
University of Manitoba
Copyright ©2003 Journal of Economic Integration
Using a matched sample design where companies are matched by size and industry from Australian, Canadian and US capital markets, we investigate whether capital market integration varies across industries and by geographical proximity. The tests are conducted in the multi-factor pricing framework over the 1983-1997 period. Our evidence supports two main findings. First, the pricing of Australian stocks is different from that of their Canadian and U.S. counterparts. The Australian stocks are priced in a partially segmented global market whereas the Canadian stocks are priced in a regionally integrated North American stock market. Second, global industry stocks such as oil and mining stocks are priced in a relatively integrated capital market while regional industry stocks such as consumer and capital goods stocks are priced in segmented markets. This evidence suggests that industry and geographical distance may proxy factors that may be relevant in international asset pricing. JEL Classifications: F 30, G12, G15
Keywords: I
1. Koutoulas, G. and Kryzanowski, L., (1994), "Integration or Segmentation of the Canadian Stock Market: Evidence Based on the APT", Canadian Journal of Economics, 27, 329-351.
2. Lessard, D. R., (1974), "World, National and Industry Factors in Equity Returns," Journal of Finance, 29, 379-391.
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