Stock market integration between new EU member states and the Euro-zone
- 320 Downloads
This paper measures the degree in stock market integration between five Eastern European countries and the Euro-zone. A potentially gradual transition in correlations is accommodated by smooth transition conditional correlation models. We find that the Czech, Slovenian and Polish markets have increased their correlation to the Euro-zone from 1997 to 2008. However, this is not a broad-based phenomenon across Eastern Europe. The results also show that the increase in correlations is not a reflection of a world-wide phenomenon of financial integration but is mainly driven by EU-related developments.
KeywordsMultivariate GARCH Smooth transition conditional correlation Stock return comovement New EU members
JEL ClassificationC32 C51 F36 G15
Unable to display preview. Download preview PDF.
- Cappiello L, Gérard B, Kadareja A, Manganelli S (2006b) Financial integration of new EU member states. Working Paper Series No. 683, ECBGoogle Scholar
- Darvas Z, Szapáry G (2005) Business cycle synchronization in the enlarged EU: comovements in the new and old members. Discussion Paper No. 5179, CEPR, LondonGoogle Scholar
- Hanousek J, Kočenda E, Kutan AM (2008) The reaction of asset prices to macroeconomic announcements in new EU Markets: evidence from intraday data. Working Papers Series No. 349, CERGE-EI, Charles University, PragueGoogle Scholar
- Savva CS, Neanidis K, Osborn DR (forthcoming) Business cycle synchronization of the Euro area with the new and negotiating member countries. Int J Finance EconGoogle Scholar
- Silvennoinen A, Teräsvirta T (2005) Multivariate autoregressive conditional heteroskedasticity with smooth transitions in conditional correlations. Working Paper Series in Economics and Finance No. 577, SSE/EFIGoogle Scholar
- Silvennoinen A, Teräsvirta T (2007) Modelling multivariate conditional heteroskedasticity with the double smooth transition conditional correlation GARCH model. Working Paper Series in Economics and Finance No. 652, SSE/EFIGoogle Scholar