Financial integration of capital markets.

Summary This thesis is devoted to the theoretical and empirical analysis of the financial integration of capital markets. The first part reviews the literature on the phenomenon. The first chapter presents, defines and measures financial integration. By reference to the law of one price, two assets with the same characteristics, but belonging to two different countries, are integrated if they have the same expected return. This implies that the risk premiums associated with the international (common) factors are identical. The next two chapters present a review of the literature on financial integration within the framework of the two valuation models that constitute the paradigm of international finance theory: medaf and apt. This part also allows us to study the impact of barriers to international investment on portfolio choice and to examine the different forms of partial integration, namely segmentation by zone, by access cost and by agents. This review of the literature leads to the ambiguous conclusion that the degree of integration varies according to the markets, the periods and the approaches considered. The objective of the second part of this paper is therefore to empirically examine the financial integration hypothesis and its evolution over the period 1973-1995 using an international sample of 230 assets. In order to do so, it is necessary to verify that arbitrage operations lead to equal returns for assets with the same characteristics. These studies are conducted within the framework of two theoretical models: the medaf and the apt. The results obtained do not validate the hypothesis of integration of the six markets studied over the period 1973-1995, regardless of the model used. Finally, concerning the evolution of the degree of financial integration, the results do not validate the hypothesis that the markets are more integrated today.