PhD Thesis Title: Essays in International Finance and Asset Pricing
Supervisor: Professor John Cotter
External Examiner: Professor Charlotte Christiansen, Aarhus University
My dissertation consisted of three essays which investigate long-term trends in international capital markets. The first essay explores the integration of individual U.S. stocks with global equity markets in the period 1974 to 2015. I hypothesise that integration may vary across size and industry portfolios due to the real economic fundamentals of firms and the conduct of financial market trading by international investors. I find that small stocks have low levels of integration throughout the sample period, but I find positive and significant time trends in integration for medium and large stocks. Financial, mining, and oil stocks are particularly highly integrated in the later years of the sample. These findings have important implications for investors developing risk management strategies. The second essay examines the dynamics of sovereign bond market integration in a sample of 24 developed countries in the period 1986 to 2014. Integration levels have increased significantly over this period for majority of these sample countries. However, peripheral European countries -- such as Greece, Ireland, and Portugal -- have experienced sharp declines in integration in the post-2008 period. I observe that integration levels vary by maturity and that the average “term structure of bond market integration” is negative. The third essay considers the persistence over time of a set of nine well-known equity market anomalies in the cross-section of UK stocks. This set includes the momentum, return reversal, and size anomalies. I find strong evidence of diminished statistical and economic significance for the majority of these anomalies in the period 1990 to 2013. These findings are consistent with improvements in market efficiency over time with respect to well-known anomaly variables.