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Financial Integration of Stock Markets among New EU Member States and the Euro Area

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Abstract

The paper considers the empirical dimension of financial integration among stock-exchange markets in four new European Union member states (Czech Republic, Hungary, Poland, and Slovakia) in comparison with the euro area. The main objective is to test for the existence and determine the degree of the four states’ financial integration relative to the euro currency union. The analysis is performed at the country level (using national stock-exchange indices) and at the sectoral level (considering banking, chemical, electricity, and telecommunication indices). Our empirical evaluation consists of (1) a harmonization analysis (by means of standard and rolling correlation analysis) to outline the overall pattern of integration; (2) the application of the concept of beta convergence (through the use of time series, panel, and state-space techniques) to identify the speed of integration; and (3) the application of so-called sigma convergence to measure the degree of integration. We find evidence of respective stock-market integration on both national and sectoral levels between the Czech Republic, Hungary, Poland, and the euro area.

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Bibliographic Info

Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 57 (2007)
Issue (Month): 7-8 (September)
Pages: 341-362

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Handle: RePEc:fau:fauart:v:57:y:2007:i:7-8:p:341-362

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Keywords: beta convergence; new EU member states; sigma convergence; stock markets;

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Citations

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Cited by:
  1. Anita Radman Peša & Mejra Festić, 2012. "Testing the “EU Announcement Effect” on Stock Market Indices and Macroeconomic Variables in Croatia Between 2000 and 2010," Prague Economic Papers, University of Economics, Prague, vol. 2012(4), pages 450-469.
  2. repec:prg:jnlpep:v:2013:y:2013:i:4:id:434:p:450-469 is not listed on IDEAS
  3. Vinokurov, Evgeny, 2009. "Systema Indikatorov Evraziyskoy Integracii
    [The System of Indicators of Eurasian Integration]
    ," MPRA Paper 20914, University Library of Munich, Germany.
  4. Jan Babecky & Lubos Komarek & Zlatuse Komarkova, 2010. "Financial Integration at Times of Financial Instability," Working Papers 2010/09, Czech National Bank, Research Department.
  5. Horvath, Roman & Petrovski, Dragan, 2013. "International stock market integration: Central and South Eastern Europe compared," Economic Systems, Elsevier, vol. 37(1), pages 81-91.
  6. Avadanei, Andreea, 2011. "Indicatori de măsurare a integrării financiare europene. Literature review
    [Measuring European financial market integration. A literature review]
    ," MPRA Paper 28737, University Library of Munich, Germany.
  7. Jan Babecky & Sofia Bauducco & Ales Bulir & Martin Cihak & Petr Jakubik & Lubos Komarek & Zlata Komarkova & Jiri Podpiera & Christian Schmieder & Laurent Weill, 2009. "CNB Economic Research Bulletin: Financial and Global Stability Issues," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 7, number rb07/2 edited by Jan Babecky & Jan Frait, August.
  8. Tausch, Arno, 2013. "The hallmarks of crisis. A new center-periphery perspective on long cycles," MPRA Paper 48356, University Library of Munich, Germany.
  9. Mikhail Stolbov, 2014. "How Are Interbank and Sovereign Debt Markets Linked? Evidence from 14 OECD Countries, the Euro Area and Russia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(3), pages 331-348, June.
  10. repec:ebl:ecbull:v:7:y:2008:i:14:p:1-12 is not listed on IDEAS
  11. repec:ecu:wpaper:2010-01 is not listed on IDEAS
  12. Tigran Poghosyan, 2009. "Are “new” and “old” EU members becoming more financially integrated? A threshold cointegration analysis," International Economics and Economic Policy, Springer, vol. 6(3), pages 259-281, October.
  13. Babeckii, Ian & Komárek, Luboš & Komárková, Zlatuše, 2012. "Integration of Chinese and Russian stock markets with world markets: National and sectoral perspectives," BOFIT Discussion Papers 4/2012, Bank of Finland, Institute for Economies in Transition.
  14. Jan Babecky & Oxana Babetskaia-Kukharchuk & Kamil Galuscak & Dana Hajkova & Jaroslav Hermanek & Tomas Holub & Roman Horvath & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Filip Novot, 2008. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2008," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as08 edited by Dana Hajkova, August.
  15. Vinokurov, Evgeny, 2010. "The System of Indicators of Eurasian Integration," MPRA Paper 22227, University Library of Munich, Germany.
  16. Dragan Tevdovski, 2014. "Extreme negative coexceedances in South Eastern European stock markets," CREATES Research Papers 2014-18, School of Economics and Management, University of Aarhus.
  17. Alenka Kavkler & Mejra Festić, 2011. "Modelling Stock Exchange Index Returns in Different GDP Growth Regimes," Prague Economic Papers, University of Economics, Prague, vol. 2011(1), pages 3-22.
  18. Pirovano, Mara, 2012. "Monetary policy and stock prices in small open economies: Empirical evidence for the new EU member states," Economic Systems, Elsevier, vol. 36(3), pages 372-390.
  19. Václav Žďárek, 2011. "An Empirical Analysis of Price Convergence of the Czech Republic and the New EU Member States towards the Euro Area," Politická ekonomie, University of Economics, Prague, vol. 2011(4), pages 454-474.
  20. Vodova, Pavla, 2012. "Price Indicators as a Measure of Credit Market Integration in the Visegrad Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 62-73, March.

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