Atlantic Economic Journal

, Volume 39, Issue 1, pp 7-18

First online:

Political and Institutional Factors in the Convergence of International Equity Markets: Evidence from the Club Convergence and Clustering Procedure

  • Nicholas ApergisAffiliated withDepartment of Banking and Financial Management, University of Piraeus Email author 
  • , Christina ChristouAffiliated withDepartment of Banking and Financial Management, University of Piraeus
  • , James PayneAffiliated withDepartment of Economics, Illinois State University

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In this study the new panel convergence methodology developed by Phillips and Sul (2007) is employed to explore the convergence dynamics of international equity markets and determine whether political and institutional factors can explain convergence or divergence patterns across international equity markets. The empirical findings suggest that international equity markets do not form a homogeneous convergence club. Seven specific political and institutional factors are used to explain such divergent behavior. The empirical analysis documented specific factors, i.e. democratization, unemployment benefits, and public expenditure on pensions, which seem capable of explaining such a heterogeneous divergent pattern among the equity markets under study.


Equity markets convergence Political factors Institutional factors Club clustering methodology


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