The objective of this paper is to test financial integration for a sample of 15 developed financial markets and 7 emerging markets between December 1987 and December 2004 by using Conditional International CAPM. The results of the test of International CAPM with time-varying moments provide evidence that the world portfolio is conditionally mean-variance efficient for the group of G7 countries. For emerging markets, we reject the hypothesis of integrated capital markets and we find evidence of time-varying segmentation.

The objective of this paper is to examine the short and long term relationships between 22 financial markets in order to study their implication on the potential gains from international diversification during the period 1987 to 2004. We will make an empirical study based on cointegration, causality tests and error correction model. The results of bivariate tests show the existence of long term equilibrium relations between United States and some developed markets such as Belgium, United Kingdom and Sweden. The results of multivariate tests show that the increase of financial integration degree has not affected the expected benefits from international diversification in emerging markets. The gains remain significantly important for American investors in emerging equity markets.