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Stock market integration between new EU member states and the Euro-zone

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  • Christos Savva
  • Nektarios Aslanidis

Abstract

This paper measures the degree in stock market integration between five Eastern European countries and the Euro-zone. A potentially gradual transition in correlations is accommodated by smooth transition conditional correlation models. We find that the correlation between stock markets has increased from 2001 to 2007. In particular, the Czech and Polish markets show a higher correlation to the Euro-zone. However, this is not a broad-based phenomenon across Eastern Europe. We also find that the increase in correlations is not a reflection of a world-wide phenomenon of financial integration but appears to be specific to the European market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; New EU Members.
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  • Christos Savva & Nektarios Aslanidis, 2010. "Stock market integration between new EU member states and the Euro-zone," Empirical Economics, Springer, vol. 39(2), pages 337-351, October.
    • Handle: RePEc:spr:empeco:v:39:y:2010:i:2:p:337-351
    DOI: 10.1007/s00181-009-0306-6
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    More about this item

    Keywords

    Multivariate GARCH; Smooth transition conditional correlation; Stock return comovement; New EU members; C32; C51; F36; G15;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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