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Financial integration and portfolio investments to emerging Balkan equity markets

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  • Syriopoulos, Theodore

Abstract

The study investigates the risk and return profile of international portfolios allocated by investors to major Balkan equity markets, namely Romania, Bulgaria, Croatia, Turkey, Cyprus and Greece against developed markets, Germany and the US. An error-correction vector autoregressive framework models financial integration and investigates causality effects and cointegration vectors, depicting short- and long-run dynamic linkages. The empirical findings support the presence of two cointegration vectors, indicating a stationary long-run relationship. Both domestic and external forces affect equity market behavior, leading to a long-run equilibrium. These findings are important for international asset allocation, since long-run comovements imply that risk diversification and attainment of superior portfolio returns in the Balkan equity markets may be limited for international investors, although short-run benefits may be potentially feasible in arbitrage mispricings.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Multinational Financial Management.

Volume (Year): 21 (2011)
Issue (Month): 1 (February)
Pages: 40-54

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Handle: RePEc:eee:mulfin:v:21:y:2011:i:1:p:40-54

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Web page: http://www.elsevier.com/locate/mulfin

Related research

Keywords: Market comovements Dynamic cointegration Causality effects Portfolio diversification Balkan equity markets;

References

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Citations

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Cited by:
  1. Sarwar, Ghulam, 2012. "Is VIX an investor fear gauge in BRIC equity markets?," Journal of Multinational Financial Management, Elsevier, vol. 22(3), pages 55-65.
  2. Shackleton, Mark B. & Voukelatos, Nikolaos, 2013. "Hedging efficiency in the Greek options market before and after the financial crisis of 2008," Journal of Multinational Financial Management, Elsevier, vol. 23(1), pages 1-18.
  3. Guidi, Francesco & Ugur, Mehmet, 2012. "Are South East Europe stock markets integrated with regional and global stock markets?," MPRA Paper 44133, University Library of Munich, Germany, revised Dec 2012.
  4. Kenourgios, Dimitris & Samitas, Aristeidis, 2011. "Equity market integration in emerging Balkan markets," Research in International Business and Finance, Elsevier, vol. 25(3), pages 296-307, September.

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