Common Information in a Common Market? Variance Changes in European Capital Markets.

International finance theory argues that integrated markets are priced using common information. In this study, we search twelve European Capital Markets for breakpoints in the way assets are priced and correlate these dates to events in each country. Our analysis shows that the events are related primarily to domestic events, not pan-European events. However, we do find common events for their currency markets. We conclude that domestic factors cannot be ignored even when capital markets are integrating, or even have integrated.