What Drives the Regional Integration of Emerging Stock Markets?
AbstractThis study explores the fundamental driving forces of regional equity market integration. The determinant factors are categorized into three dimensions: local, regional and world instrumental variables. My sample consists of equity markets in 4 notable regional trading blocs: Latin America, Southeastern Asia, Southeastern Europe and Middle East over the period March 31, 1996 to March 31, 2008. We measure market integration based on pricing error as proposed by Bhattacharya and Daouk (2002) and Adler and Qi (2003). Using multivariate BEKK- GARCH (1, 1) process and non linear regression, our results show that the time-varying degree of integration of Latin America, Southeastern Asia, and Southeastern Europe region, are satisfactorily explained by the regional level of trade openness and market development. For the Middle East, individual-market volatility and inflation play a significant role in the integration process.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 31 (2011)
Issue (Month): 3 ()
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Emerging Stock Market; Financial Integration; Determinant Factors; Multivariate GARCH;
Other versions of this item:
- Khaled GUESMI, 2011. "What drive the regional integration of emerging stock markets?," Economics Bulletin, AccessEcon, vol. 31(2), pages A23.
- F0 - International Economics - - General
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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