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What drive the regional integration of emerging stock markets?

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  • Khaled GUESMI

    (Economix)

Abstract

This study explores the fundamental driving forces of regional equity market integration. The determinant factors are categorized into three dimensions: market attribute, economic fundamentals and world information. My sample consists of equity markets in 4 notable regional trading blocs: Latin America, Southeastern Asia, Southeastern Europe and Middle East over the period March 31, 1996-March 31, 2008. I measure market integration based on pricing error as proposed by Bhattacharya and Daouk (2002) and Adler and Qi (2003). Using multivariate BEKK-GARCH (1, 1) process and switching regime model, my results show that the time-varying degree of integration of Latin America, Southeastern Asia, Southeastern Europe region, satisfactorily are explained by the regional level of trade openness and market development. For the Middle East, individual-market volatility and inflation play a significant role in the integration process. The analysis of the financial integration also reveals that the degree of integration of equity markets considerably varies over time.

Suggested Citation

  • Khaled GUESMI, 2011. "What drive the regional integration of emerging stock markets?," Economics Bulletin, AccessEcon, vol. 31(2), pages 1-23.
    • Handle: RePEc:ebl:ecbull:eb-11-00280
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    References listed on IDEAS

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    Cited by:

    1. Abid, Ilyes & Kaabia, Olfa & Guesmi, Khaled, 2014. "Stock market integration and risk premium: Empirical evidence for emerging economies of South Asia," Economic Modelling, Elsevier, vol. 37(C), pages 408-416.
    2. Ekaterina Dorodnykh, 2013. "What Drives Stock Exchange Integration?," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 6(2), pages 47-79, September.
    3. Ekaterina Dorodnykh, 2014. "Determinants of stock exchange integration: evidence in worldwide perspective," Journal of Economic Studies, Emerald Group Publishing, vol. 41(2), pages 292 - 316, March.

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    More about this item

    Keywords

    Emerging Stock Market; Financial Integration; Multivariate GARCH;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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