Cross-Sectional Variations in the Degree of Global Integration : The Case of Russian Equities

While there is a significant amount of research on integration differences across countries, the integration variations across industry or market capitalization groups within a single country have been largely unexplored. The degree of integration, however, varies widely cross-sectionally. In this paper, we analyze the degree of integration of Russian stocks grouped into five size and five industry portfolios using the GMM methodology and conditional asset pricing model. In line with economic intuition, the estimates of average degrees of integration show a noticeable downward trend with a decrease in the portfolio size and are also smaller for less diversified industries. The strength of integration is higher for those portfolios that have more firms which cross-list their stocks on foreign exchanges and/or sell their output internationally