Financial Integration, International Portfolio Choice and the European Monetary Union

By R. A. Santis, Bruno Gérard. Social Science Research Network, 2006

146 citations recorded by the source corpus.

We investigate the determinants of bilateral international equity and bond portfolio reallocation across a large cross section of countries over the 1997 to 2001 period. We first argue that financial integration is not a global phenomenon, as equity and bond home biases declined significantly only among European countries, Australia, New Zealand and Singapore. Then, we show that the European Economic and Monetary Union (EMU) eased the access to the equity market and, to a larger extent, the bond market; thereby, enhancing regional financial integration in the euro area. Beside the effect of the EMU, the strongest determinants of the changes in portfolio weights are expected diversification benefits and the initial degree of underweight. JEL Classification: C13, C21, F37, G11

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/9b7d9311eb7b7ae613b57f5fdeb850330714a85c

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Finance

Citations in the corpus

MEASURING FINANCIAL INTEGRATION IN NEW EU MEMBER STATES (2008, unknown): “The process of integration should increase cross-border investments among countries which join the EU and are in the process of joining the European and Economic Monetary Union (see, for instance, De Santis and Gerard, 2006).”
Cross-Border Mergers and Acquisitions and European Integration (2009, unknown): “3 See Coeurdacier and Martin (2006), De Santis (2006), De Santis and Gerard (2006), Lane (2006).”
What Lies Beneath the Euro's Effect on Financial Integration? Currency Risk, Legal Harmonization, or Trade? (2010, unknown): “Similarly Lane and Milesi-Ferretti (2008), Coeurdacier and De Santis and Gerard (2006), among others, document that the”
European Economic and Monetary Integration, and the Optimum Currency Area Theory (2008, background): “There is evidence of euro area investors having assigned a higher weight to portfolio investment in euro area countries, even after taking into account the effect of a large set of variables borrowed from the finance literature and adjusting for valuation changes (see De Santis and Gérard (2006)).”
Government Bonds and Their Investors: What are the Facts and Do They Matter? (2012, unknown): “In the euro area, equal regulatory treatment and the perception of homogenous credit risk has fostered investors’ desire to diversify, thereby increasing the share of cross-holdings by non-residents (De Santis and Gerard, 2006).”
The geography of asset trade and the euro: insiders and outsiders (2009, background): “De Santis and Gerard (2006) also analyze the impact of EMU on portfolio weights rebalancing and Berkel (2006) on the effect of EMU on gross German portfolio flows.”
International portfolio diversification is better than you think (2011, background): “(2)See French and Poterba (1991) for early evidence on the home bias, Lewis (1999) and Chan, Covrig and Ng (2005) or Sercu (2007) for more recent estimates across countries (see also Appendix, Table 7). Lane and Milesi-Feretti (2003) document the increase in cross-border equity holdings.”
The European Union, the Euro, and Equity Market Integration (2010, background): “For example, a voluminous literature establishes that the Euro has increased bilateral bond and equity holdings (e.g. Lane, 2006; De Santis and Gérard, 2006; Coeurdacier and Martin, 2009), cross-border banking activities (Blank and Buch, 2007; Kalemli-Ozcan, Papaioannou and Peydró, 2010; Spiegel,…”