Equity market integration in emerging Balkan markets
AbstractThis paper examines long-run relationships among five Balkan emerging stock markets (Turkey, Romania, Bulgaria, Croatia, Serbia), the United States and three developed European markets (UK, Germany, Greece), during the period 2000-2009. Conventional, regime-switching cointegration tests and Monte Carlo simulation provide evidence in favour of a long-run cointegrating relationship between the Balkan emerging markets within the region and globally. Moreover, we apply the Asymmetric Generalized Dynamic Conditional Correlation (AG-DCC) multivariate GARCH model of Cappiello et al. (2006), in order to capture the impact of the 2007-2009 financial crisis on the time-varying correlation dynamics among the developed and the Balkan stock markets. Results show that stock market dependence is heightened, supporting the herding behaviour during the 2008 stock market crash period. Our findings have important implications for international portfolio diversification and the effectiveness of domestic policies, as these emerging markets are exposed to external shocks.
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Bibliographic InfoArticle provided by Elsevier in its journal Research in International Business and Finance.
Volume (Year): 25 (2011)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/ribaf
Emerging Balkan stock markets Cointegration Regime switching Dynamic conditional correlations;
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