Stock market reaction to EC economic and monetary integration

The risk/return characteristics of world stock markets are examined for the period 1973-1990 and three sub-periods. From the perspective of the US investor, EC stock markets individually and collectively yield higher average rates of return but with higher variability than the US stock market (except for the sub-period 1979-1984). However, investment in a well-diversified portfolio of EC stocks earned marginally higher average returns with less risk than investing in the Japanese stock market (except for the sub-period 1979-1984). The evidence suggests that a strong dollar and deeper recession in Europe may have contributed to the poor performance of EC stock markets between 1979 and 1984.