7 We use the non-linear, seemingly unrelated regression (SUR) technique, which is asymptotically efficient and equivalent to MLE **(see** further Gibbons, 1980 and 1982).? This method is consistent, but may not have good small sample properties. We therefore use all securitics which are consistently available in a given market over the 1989-1992 period. We estimate for each market N equations (N being the number of securities in the market) as a system of equations with cross-equation restrictions on the y and vl coefficients in each market and no restrictions on the ,-s (except that they are constant over time). The estimation technique allows for correction of heteroskedasticity across stocks and exploits the contemporaneously correlated errors. The parameter estimates and other statistics are in Table _5._ The R<sup>2</sup> s for the segmentation and integration tests (last column) vary between 0. 18 (Jordan) and 0.74 (Nigeria) and are of similar magnitude (by country) for the two tests (reflecting the fact that the two systems are basically run with the same set of fundamental variables). The integration hypothesis is rejected at the _5%_ level for 10 out of the 16 countries for which we have consistent data.' The segmentation hypothesis is not rejected at the _5%_ level for all countries and at the 10% level for only three countries (India, Korea and the Philippines). For two countries, the segmentation test did not converge (Colombia and Malaysia). Combining the two tests, market integration can and market segmentation cannot be rejected (at the 5% level) for eight countries (Brazil, Greece, Korea, Mexico, Pakistan, the Philippines, Taiwan and Thailand). For six countries neither market segmentation nor market integration can be rejected (Chile, India, Jordan, Nigeria, Venezuela and Zimbabwe), possibly indicating a low power of our test.

The results of these estimation techniques can be compared with the results for CanadaUS: Jorion and Schwartz (1986) find strong evidence of market segmentation; and Mittoo (1992) finds evidence of market segmentation for the pre-1981 period, but integration for the post-1981 period. For developing countries, Errunza, Losq and Padmanabhan (1992), using IFC EMDB data over the 1976-1987 period, reject complete market integration for all eight developing countries they study and reject complete market segmentation for five (Brazil, Chile, Greece, Korea and Mexico) of these eight countries. They conclude that "mild" segmentation describes the market structure for these five countries best. Compared to their results, we find that relatively fewer countries are not integrated (10 out of 16 compared to 8 out of 8), but more are 'We use the SAS routine SYSNLIN (version 5.0) for the NLSUR. Other approaches are the MLE method of Litzenberger-Ramaswamy (1979); the procedure outlined in Gibbons (1980); and the odd/even instrumental variable approach of Mankiw and Shapiro (1986). We did use the odd/even method but this method had a lower power as it could neither reject market segmentation nor integration for any of the countries.

'Data for individual stock rates of return are missing for Argentina for all years; for Turkey and Indonesia, data were only available since 1987 and 1990 respectively; for Portugal no stock has consistently data available for the 1989-1992 period.