Monetary Union effects on European stock market integration: An international CAPM approach with currency risk
AbstractThis paper explores the evolution of European stock markets integration with the US stock market, after the formation of European Monetary Union (EMU). To this end, we employ a dynamic version of international CAPM in the absence of purchasing power parity. The conditional covariance matrix of asset returns is estimated employing a parsimonious diagonal BEKK multivariate GARCH-in-mean model. The data sample is daily extending from June 1994 to June 2009. The introduction of world-wide information variables into the system reveals that the formation of monetary union has not exerted positive influence on EMU markets integration with US stock market. Moreover at the same time rolling estimates show that member states domestic or idiosyncratic risks have exhibited a lower volatility level.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 37477.
Date of creation: Nov 2011
Date of revision:
Publication status: Published in International Journal of Economics and Finance 6.3(2011): pp. 34-41
Market integration; EMU; MGARCH-M specification;
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
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