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

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Author Info
Babecký, Jan (Czech National Bank ; CES, University of Paris-1 Sorbonne and CERGE-EI, Charles University)
Komárek, Luboš (Czech National Bank ; Prague School of Economics)
Komárková, Zlatuše (Czech National Bank)

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Abstract

The paper considers the empirical dimension of financial integration among stock markets in four new European Union member states (the 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) an analysis of alignment (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 stock market integration on both the national and sectoral levels between the Czech Republic, Hungary, Poland and the euro area

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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 849.

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Length: 28 pages
Date of creation: 2008
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Handle: RePEc:wrk:warwec:849

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  21. Bekaert, Geert & Harvey, Campbell R. & Lumsdaine, Robin L., 2002. "Dating the integration of world equity markets," Journal of Financial Economics, Elsevier, vol. 65(2), pages 203-247, August. [Downloadable!] (restricted)
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  22. Azman-Saini, W N W, et al, 2002. "Financial Integration and the ASEAN-5 Equity Markets," Applied Economics, Taylor and Francis Journals, vol. 34(18), pages 2283-88, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Shamila Jayasuriya & William Shambora, 2008. "The world is shrinking: Evidence for stock market convergence," Economics Bulletin, Economics Bulletin, vol. 7(14), pages 1-12. [Downloadable!]
  2. 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. [Downloadable!] (restricted)
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