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Are the Central European Stock Markets Still Different? A Cointegration Analysis

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Author Info
Rousova, Linda
Abstract

The Central European countries became members of the European Union (EU) in May 2004. Has their accession into the EU also resulted in a stronger financial integration with the global economy in general and with the "old" EU countries in particular? Based on a cointegration analysis applied to stock market movements, I detect for the period after the EU enlargement two new long-run equilibrium relations that indeed suggest a stronger inter-dependence of the markets, whereas no such relations can be observed before this date. In particular, one new relation links the Central European markets to the Western European market, reflecting tighter co-movements of the "new" and the "old" EU markets. The second relation points at the role of the US market for both the Central and the Western European markets.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 10993.

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Date of creation: 08 Sep 2009
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Handle: RePEc:lmu:muenec:10993

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Related research
Keywords: Transition Economies; Emerging stock markets; Central Europe; European integration; Cointegration; Long-run stock market linkages;

Find related papers by JEL classification:
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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  7. Jens Köke & Michael Schröder, 2003. "The Prospects of Capital Markets in Central and Eastern Europe," Eastern European Economics, M.E. Sharpe, Inc., vol. 41(4), pages 5-37, July. [Downloadable!] (restricted)
  8. Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "Divestitures, privatization and corporate performance in emerging markets," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 43-73, 01. [Downloadable!] (restricted)
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  10. Egert, Balazs & Kocenda, Evzen, 2007. "Interdependence between Eastern and Western European stock markets: Evidence from intraday data," Economic Systems, Elsevier, vol. 31(2), pages 184-203, June. [Downloadable!] (restricted)
  11. Bessler, David A. & Yang, Jian, 2003. "The structure of interdependence in international stock markets," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 261-287, April. [Downloadable!] (restricted)
  12. Taylor, Mark P & Tonks, Ian, 1989. "The Internationalisation of Stock Markets and the Abolition of U.K. Exchange Control," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 332-36, May. [Downloadable!] (restricted)
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