Capital market integration refers to the extent to which similar assets in different countries are priced equally. Markets that are not fully integrated are partially segmented, or prices are driven in part by purely local phenomena. Which of the following statements about capital market integration is incorrect?
A) The so-called euromarket, or the international market for financial securities (both debt and equity), should be more integrated than any domestic capital market because it spans many highly developed countries.
B) Domestic capital markets in developed industrial nations are extensively though not entirely integrated.
C) Domestic capital markets in emerging market countries are clearly segmented when compared to developed countries, some more so than others.
D) The CAPM in its usual form works reasonably well in largely integrated capital markets with the specification of the proper market index and beta coefficient, but the model cannot be used reliably in segmented markets without substantive revisions.
E) None of the statements are incorrect, in fact, all of the statements above are correct.

Question

Quizplus · Accepted Answer

All the statements provided accurately describe aspects of capital market integration, including the relative integration of euromarkets, the integration of domestic markets in developed countries, the segmentation of markets in emerging economies, and the applicability of the CAPM model in different market integration contexts.

Capital Market Integration Refers to the Extent to Which Similar