TY  - JOUR
AU  - Bekaert,Geert
AU  - Harvey,Campbell R.
AU  - Lundblad,Christian T.
AU  - Siegel,Stephan
TI  - The European Union, the Euro, and Equity Market Integration
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16583
PY  - 2010
Y2  - December 2010
UR  - http://www.nber.org/papers/w16583
L1  - http://www.nber.org/papers/w16583.pdf
N1  - Author contact info:
Geert Bekaert
Graduate School of Business
Columbia University
3022 Broadway, 411 Uris Hall
New York, NY 10027
Tel: 212/854-9156
Fax: 212/662-8474
E-Mail: gb241@columbia.edu

Campbell R. Harvey
Duke University
Fuqua School of Business
Durham, NC 27708-0120
Tel: 919/660-7768
Fax: 919/660-8030
E-Mail: cam.harvey@duke.edu

Christian Lundblad
Department of Finance
University of North Carolina at Chapel Hill
Chapel Hill, NC  27599-3490
Tel: 919-962-8441
Fax: 707-371-7060
E-Mail: Christian_Lundblad@unc.edu

Stephan Siegel
University of Washington
Michael G. Foster School of Business
430 PACCAR Hall
Box 353226
Seattle, WA 98195-3226
Tel: 206.543.0784
Fax: 206.543.7472
E-Mail: ss1110@u.washington.edu
AB  - At a time of historic challenges to the viability of the Eurozone, we assess the contribution of the EU and the Euro to equity market integration in Europe. We use a simple and essentially model free measure of bilateral market segmentation: two countries are segmented if there is a wide divergence in the valuations of their industries. We first establish that segmentation is significantly lower for EU versus non- EU members. Bilateral valuation differentials remain lower for EU members even after we control for several possible channels of integration, such as bilateral trade, direct investment positions, financial regulation, and interest rate differences. Importantly, we find that EU membership reduces equity market segmentation between member countries whether or not members have also adopted the Euro. The Euro adoption as well as the anticipation of the Euro adoption has minimal effects on market integration.
ER  -