This article contributes to the literature on stock market integration by developing and estimating a capital asset pricing model with segmentation effects in order to assess stock market segmentation and its effects on risk premia at the regional level.

This paper employs a conditional version of the International Capital Asset Pricing Model (ICAPM) to investigate the determinants of regional integration of stock markets in the Latin America over the period 1996-2008. This model allows for three sources of time-varying risks: common regional...