Are the European markets integrated? Evidence from French stocks cross-listed on the German market

Abstract

This study examines the behaviour of French stocks that are cross-listed on Xetra for the period between May 1998 and November 1999. It is found that after French stocks are cross-listed in the German market, their exposure to local market risk declines and their exposure to the world market risk increases significantly. The results are consistent with the market segmentation hypothesis. Similar results are observed when stocks are grouped into size por(folios and book value-to-market value porifolios. The analysis of the abnormal returns also supports a significant decline in stock returns aier cross-listing.