Other market segments have even more potential for greater integration. In fact, the euro area equity markets are still quite fragmented, but a gradual integration process is ongoing. For example, our indicators show that stock prices across the euro area increasingly react to euro area-wide factors and news.
Another indicator to measure the degree of integration in euro area equity markets is the relative importance of sector versus country-based investment strategies. The indicator is derived by calculating and comparing the cross-sector dispersion with the cross-country dispersion of equity returns.