Global Market Integration from Stock Analyst Forecasts

Abstract

This paper presents new evidence on international financial market integration using stock analyst earnings forecasts from around the world. By examining cash flow and discount rate news comovements, we find that financial and economic integration has diverged over time as financial integration has developed particularly more rapidly than economic integration over the past decade. However, this divergence is less severe in emerging markets compared with developed markets where financial integration has proceeded at a slower pace. We find that financial integration has developed relatively slowly in emerging markets due to the hampering effects of their poor information environments.