Industry Risk and Market Integration
Francesca Carrieri, Vihang Errunza, Sergei Sarkissian
Faculty of Management, McGill University, Montrial, Quebec, Canada H3A1G5
[email=Ifrancesca.carrieri@mcgill.vciah,a]Ifrancesca.carrieri@mcgill.vciah,a[/email]
ng.errunza@mcgill.csae,
rgei.sarkissian@mcgill.ca}
T
Traditionallyi,n tegration has been studied at the country level. With increasing economic integration, industrial
reorganization, and blurring of national boundaries (e.g., European Union (EU)), it is important to
investigate global integration at the industry level. We argue that country-level integration (segmentation) does
not preclude industry-level segmentation (integration). Indeed, our results suggest that a country is integrated
with (segmented from) the world capital markets only if most of her industries are integrated (segmented).
We also show that although global industry risk is small, it can be priced for certain industries. Industries
that are priced differently from either the world or domestic markets represent incremental opportunities for