
This paper develops a simple methodology to test for asset integration, and applies it within and between American stock markets. Our technique relies on estimating and comparing expected risk-free rates across assets. Expected risk-free rates are allowed to vary freely over time, constrained only by the fact that they must be equal across (risk-adjusted) assets in well integrated markets. Assets are allowed to have standard risk characteristics, and are constrained by a factor model of covariances over short time periods. We find that implied expected risk-free rates vary dramatically over time, unlike short interest rates. Further, internal integration in the S&P 500 market is never rejected and is generally not rejected in the NASDAQ. Integration between the NASDAQ and the S&P, however, is always rejected dramatically.
asset; conditional; expected; intertemporal; market; price; rate; risk-free; stock, Asset prices;United States;risk-free, rate, intertemporal, asset, market, expected, price, stock, conditional, nasdaq, equation, covariance, bootstrap, statistics, assest,, jel: jel:G14, jel: jel:G15, jel: jel:F32
asset; conditional; expected; intertemporal; market; price; rate; risk-free; stock, Asset prices;United States;risk-free, rate, intertemporal, asset, market, expected, price, stock, conditional, nasdaq, equation, covariance, bootstrap, statistics, assest,, jel: jel:G14, jel: jel:G15, jel: jel:F32
| selected citations These citations are derived from selected sources. This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | 11 | |
| popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network. | Average | |
| influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically). | Top 10% | |
| impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network. | Average |
