, Volume 146, Issue 3, pp 573-589,
Open Access This content is freely available online to anyone, anywhere at any time.
Date: 25 May 2010

The determinants of increasing equity market comovement: economic or financial integration?


This paper investigates to what extent the substantial increase in exposures of local European equity market returns to global shocks is mainly due to a convergence in cash flows (“economic integration”), to a convergence in discount rates (“financial integration”), or to both. We find that this increased exposure is nearly entirely due to increasing discount-rate betas. This finding is robust to alternative ways of calculating discount-rate and cash-flow shocks.