Bhamra, Harjoat S.; Coeurdacier, Nicolas; Guibaud, Stéphane - In: Journal of Economic Theory 154 (2014) C, pp. 490-542
integrated stock markets. We consider a continuous-time, two-country endowment economy, where the level of financial integration …-level stock returns in equilibrium. Our model is consistent with a broad range of empirical findings on international financial … integration. When the (endogenous) cross-country return correlation is high, small frictions in equity markets can generate a …