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Return Relationships Among European Equity Sectors: A Comparative Analysis Across Selected Sectors in Small and Large Economies

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  • Siv Taing
  • Andrew Worthington

Abstract

This paper examines return interrelationships between numbers of equity sectors across several European markets. The markets comprise six Member States of the European Union (EU): namely, Belgium, Finland, France, Germany, Ireland and Italy. The five sectors include the consumer discretionary, consumer staples, financial, industrials and materials sectors. Generalised Autoregressive Conditional Heteroskedasticity in Mean (GARCH- M) models are used to consider the impact of returns in other European markets on the returns in each market across each sector. The results indicate that there are relatively few significant interrelationships between sectors in different markets, with most of these accounted for by the larger markets in France, Germany and Italy. The evidence also suggests the consumer discretionary, financial and materials sectors are relatively more interrelated than the consumer staples and industrials sectors. This has clear implications for portfolio diversification and asset pricing in the EU.

Suggested Citation

  • Siv Taing & Andrew Worthington, 2005. "Return Relationships Among European Equity Sectors: A Comparative Analysis Across Selected Sectors in Small and Large Economies," Journal of Applied Economics, Taylor & Francis Journals, vol. 8(2), pages 371-388, November.
    • Handle: RePEc:taf:recsxx:v:8:y:2005:i:2:p:371-388
    DOI: 10.1080/15140326.2005.12040633
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    Cited by:

    1. B M, Lithin & chakraborty, Suman & iyer, Vishwanathan & M N, Nikhil & ledwani, Sanket, 2022. "Modeling asymmetric sovereign bond yield volatility with univariate GARCH models: Evidence from India," MPRA Paper 117067, University Library of Munich, Germany, revised 05 Jan 2023.
    2. Mojisola Olugbode & Ahmed El-Masry & John Pointon, 2014. "Exchange Rate and Interest Rate Exposure of UK Industries Using First-order Autoregressive Exponential GARCH-in-mean (EGARCH-M) Approach," Manchester School, University of Manchester, vol. 82(4), pages 409-464, July.

    More about this item

    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
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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