Convergence of EMU Equity Portfolios

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Convergence of EMU Equity Portfolios

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Giofré, Maela/M.

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Maela Giofré

Abstract

This paper demonstrates that, after integration, equity portfolios of countries that joined the European Monetary Union have converged at faster rate than those of NON EMU countries. This outcome canbe interpreted as a combination of the convergence of inflation rates and the convergence of investment barriers. On the one hand, the common monetary policy might have driven a stronger comovement in inflation rates, leading to increasingly similar hedging strategies among member countries. On the other hand, exposure to the common currency might have homogenized bilateral investment barriers, thus inducing increasingly similar portfolio allocations among member countries. We find that the comovement of inflation rates has not significantly increased after EMU inception, pointing toward an exclusive role for convergence in investment barriers.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13927.

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Date of creation: Dec 2008
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Handle: RePEc:pra:mprapa:13927

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Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
F30 - International Economics - - International Finance - - - General
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-03-14 (All new papers)
NEP-MAC-2009-03-14 (Macroeconomics)
NEP-MON-2009-03-14 (Monetary Economics)

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