Two centuries of global financial market integration: Equities, government bonds, treasury bills, and currencies

Abstract

We perform the longest and broadest study of time variation in global financial market integration ever conducted. Using a unique comprehensive dataset, we examine returns on equities, government bonds, treasury bills, and currencies in 83 countries through a period of almost two centuries. The study discloses that the integration progresses in peaks and troughs instead of linearly. Although the post-2000 markets exhibit the strongest integration in history, certain asset classes in 1860 and 1930 recorded comparable levels. The high degree of current integration is a result of the surge that commenced as recently as 1970, rather than a consequence of a multi-century gradual process.