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Stock market integration between new EU member states and the Euro-zone

Abstract

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.

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Correspondence to Christos S. Savva.

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Savva, C.S., Aslanidis, N. Stock market integration between new EU member states and the Euro-zone. Empir Econ 39, 337–351 (2010). https://doi.org/10.1007/s00181-009-0306-6

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Keywords

  • Multivariate GARCH
  • Smooth transition conditional correlation
  • Stock return comovement
  • New EU members

JEL Classification

  • C32
  • C51
  • F36
  • G15