INTEGRATION OR SEGMENTATION OF THE CANADIAN STOCK-MARKET - EVIDENCE BASED ON THE APT

The domestic and international arbitrage pricing theories are modified to encompass the hypotheses that the Canadian and global North Americ an equity markets are completely or partly integrated (segmented). The exchange rate determination literature is used to identify potentiall y priced binational factors, and the sensitivities and factor prices a re estimated using non-linear SUR. The two equity markets are only par tly integrated (segmented). Canadian stock returns are influenced by t he pure domestic components of the term structure and lagged industria l production and by the pure international components of the different ial in the Canada/U.S. leading indicators and the interest rate of eur odeposits.