Publication:
International Financial Integration through the Law of One Price

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dc.contributor.authorLevy Yeyati, Eduardo
dc.contributor.authorSchmukler, Sergio L.
dc.contributor.authorVan Horen, Neeltje
dc.date.accessioned2012-06-21T20:09:26Z
dc.date.available2012-06-21T20:09:26Z
dc.date.issued2006-04
dc.description.abstractThe authors argue that the cross-market premium (the ratio between the domestic and the international market price of cross-listed stocks) provides a valuable measure of international financial integration, reflecting accurately the factors that segment markets and inhibit price arbitrage. Applying to equity markets recent methodological developments in the purchasing power parity literature, they show that nonlinear Threshold Autoregressive (TAR) models properly capture the behavior of the cross market premium. The estimates reveal the presence of narrow non-arbitrage bands and indicate that price differences outside these bands are rapidly arbitraged away, much faster than what has been documented for good markets. Moreover, the authors find that financial integration increases with market liquidity. Capital controls, when binding, contribute to segment financial markets by widening the non-arbitrage bands and making price disparities more persistent. Crisis episodes are associated with higher volatility, rather than by more persistent deviations from the law of one price.en
dc.identifierhttp://documents.worldbank.org/curated/en/2006/04/6737251/international-financial-integration-through-law-one-price
dc.identifier.doi10.1596/1813-9450-3897
dc.identifier.urihttps://hdl.handle.net/10986/8704
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper; No. 3897
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADJUSTMENT MECHANISM
dc.subjectARBITRAGE
dc.subjectASSET MARKET
dc.subjectASSET MARKETS
dc.subjectBENCHMARK
dc.subjectCAPITAL CONTROLS
dc.subjectCAPITAL FLIGHT
dc.subjectCAPITAL INFLOWS
dc.subjectCAPITAL MARKET
dc.subjectCAPITAL MARKETS
dc.subjectCAPITAL MOBILITY
dc.subjectCAPITAL OUTFLOWS
dc.subjectCD
dc.subjectCONSUMER PRICE
dc.subjectCONSUMER PRICE INDEXES
dc.subjectCONVERTIBILITY
dc.subjectCRISIS EPISODES
dc.subjectDISCOUNT RATE
dc.subjectDIVIDENDS
dc.subjectDOMESTIC MARKET
dc.subjectDOMESTIC MARKETS
dc.subjectEMERGING ECONOMIES
dc.subjectEMERGING MARKET
dc.subjectEXCHANGE RATE
dc.subjectEXCHANGE RATE RISK
dc.subjectEXCHANGE RATES
dc.subjectFINANCIAL CRISES
dc.subjectFINANCIAL CRISIS
dc.subjectFINANCIAL INTEGRATION
dc.subjectFINANCIAL MARKET
dc.subjectFINANCIAL MARKETS
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE RISK
dc.subjectFOREIGN EXCHANGE TRANSACTIONS
dc.subjectFORWARD EXCHANGE
dc.subjectFUTURE RESEARCH
dc.subjectGOLD STANDARD
dc.subjectHOME MARKET
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL FINANCIAL MARKET
dc.subjectINTERNATIONAL INVESTORS
dc.subjectINTERNATIONAL MARKET
dc.subjectINTERNATIONAL MARKETS
dc.subjectLATIN AMERICAN
dc.subjectLIQUIDITY
dc.subjectLOCAL CURRENCY
dc.subjectMARKET INTEGRATION
dc.subjectMARKET PRICE
dc.subjectMARKET SEGMENTATION
dc.subjectMAXIMUM LIKELIHOOD ESTIMATION
dc.subjectPOLICY RESEARCH
dc.subjectPOOLING
dc.subjectPRICE COMPARISONS
dc.subjectPRICE INDEXES
dc.subjectPRICE VOLATILITY
dc.subjectPRICING MODELS
dc.subjectPURCHASING
dc.subjectPURCHASING POWER
dc.subjectPURCHASING POWER PARITY
dc.subjectRANDOM WALK
dc.subjectREAL EFFECTIVE EXCHANGE RATES
dc.subjectREAL EXCHANGE
dc.subjectREAL EXCHANGE RATES
dc.subjectREAL INTEREST
dc.subjectREAL INTEREST RATE
dc.subjectRESERVES
dc.subjectRETURN DIFFERENTIALS
dc.subjectRISK DIVERSIFICATION
dc.subjectRISK PREMIUM
dc.subjectSALE
dc.subjectSECURITIES
dc.subjectSPREAD
dc.subjectSTANDARD DEVIATION
dc.subjectSTOCK PRICES
dc.subjectSTOCKS
dc.subjectSUBSTITUTION
dc.subjectTRANSACTION COSTS
dc.subjectVOLATILITY
dc.titleInternational Financial Integration through the Law of One Priceen
dspace.entity.typePublication
okr.crossref.titleInternational Financial Integration Through The Law Of One Price
okr.date.doiregistration2025-04-10T10:27:17.508291Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2006/04/6737251/international-financial-integration-through-law-one-price
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeFinance and Markets
okr.globalpracticeTrade and Competitiveness
okr.guid268231468136182625
okr.identifier.doi10.1596/1813-9450-3897
okr.identifier.externaldocumentum000016406_20060419155915
okr.identifier.internaldocumentum6737251
okr.identifier.reportWPS3897
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/04/19/000016406_20060419155915/Rendered/PDF/wps3897.pdfen
okr.topicEconomic Theory and Research
okr.topicMacroeconomics and Economic Growth::Markets and Market Access
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.topicInternational Economics and Trade::Access to Markets
okr.topicFiscal and Monetary Policy
okr.topicInternational Economics and Trade
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublicationad1ad457-a974-53de-815c-c7010e0fdd74
relation.isAuthorOfPublication.latestForDiscoveryad1ad457-a974-53de-815c-c7010e0fdd74
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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