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Common long-term and short-term price memory in two Scandinavian stock markets

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  • Seppo Pynnonen
  • Johan Knif
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    Abstract

    This paper expands the recent empirical studies of international capital market integration in mainly three aspects. First, the study focuses on two Scandinavian markets, the Finnish and the Swedish, that are receiving more and more attention by international analysts in light of the ongoing European integration. For investors, these new markets offer interesting diversification opportunities. Secondly, the study covers a very long time span from January 1920 to December 1994. Thirdly, using a variety of approaches the paper clarifies previously published confusing results regarding the lead - lag structure between these markets. The results indicate that no evident cointegration or even fractional cointegration between the markets exist. An analysis of short-term dynamics indicates that virtually all shock impulses are absorbed in both markets within one month. Sub-period analyses reveal increasing instantaneous causality between the markets in the passage of time, whereas no meaningful Granger-causality is found.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 8 (1998)
    Issue (Month): 3 ()
    Pages: 257-265

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    Handle: RePEc:taf:apfiec:v:8:y:1998:i:3:p:257-265

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    Cited by:
    1. Syriopoulos, Theodore, 2007. "Dynamic linkages between emerging European and developed stock markets: Has the EMU any impact?," International Review of Financial Analysis, Elsevier, vol. 16(1), pages 41-60.
    2. Coakley, Jerry & Dollery, Jian & Kellard, Neil, 2008. "The role of long memory in hedging effectiveness," Computational Statistics & Data Analysis, Elsevier, vol. 52(6), pages 3075-3082, February.
    3. Kellard, Neil & Sarantis, Nicholas, 2008. "Can exchange rate volatility explain persistence in the forward premium?," Journal of Empirical Finance, Elsevier, vol. 15(4), pages 714-728, September.
    4. Kellard, Neil & Dunis, Christian & Sarantis, Nicholas, 2010. "Foreign exchange, fractional cointegration and the implied-realized volatility relation," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 882-891, April.
    5. Subhani, Muhammad Imtiaz & Hasan, Dr. Syed Akif & Mehar, Dr. Ayub & Osman, Ms. Amber, 2011. "Are the Major South Asian Equity Markets Co-Integrated?," MPRA Paper 34737, University Library of Munich, Germany, revised 2011.
    6. Theodore Syriopoulos, 2004. "International portfolio diversification to Central European stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 14(17), pages 1253-1268.
    7. Syriopoulos, Theodore, 2011. "Financial integration and portfolio investments to emerging Balkan equity markets," Journal of Multinational Financial Management, Elsevier, vol. 21(1), pages 40-54, February.
    8. Knif, Johan & Pynnonen, Seppo, 1999. "Local and global price memory of international stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(2), pages 129-147, April.
    9. Eleftherios J. Thalassinos & Evagelos D. Politis, 2011. "International Stock Markets: A Co-integration Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 113-130.

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