Country pair-correlations as a measure of financial integration: the case of the Euro equity markets
In financial economics, co-movements between equity returns are generally interpreted as a measure of equity market integration. In line with this idea, the paper investigates whether the euro equity markets have become less segmented over the last decade referring to three different estimates of pair-correlations, i.e. unconditional correlations, ex-post rolling estimates of correlations and dynamic conditional correlations (DCC). The analysis shows that pair-correlations within the euro area have indeed increased, suggesting higher financial integration of the euro equity markets. Additionally, the paper addresses the related issue of which factors have driven this integration process. The idea is that the extent of market integration may depend upon certain macroeconomic factors, that influence the degree of economic integration across countries, and upon the elimination of exchange rate volatility associated with Stage Three of EMU. The findings show that the increase in integration is explained by the relaxation of restrictions to capital mobility and of institutional barriers and by the economic convergence in Europe, while Stage Three of EMU has not further boosted integration.
|Date of creation:||Jan 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +39 071 220 7100
Fax: +39 071 220 7102
Web page: http://www.dises.univpm.it/
More information through EDIRC
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.:
- Manganelli, Simone & Hartmann, Philipp & Maddaloni, Angela, 2003.
"The euro area financial system: structure, integration and policy initiatives,"
Working Paper Series
0230, European Central Bank.
- Philipp Hartmann & Angela Maddaloni & Simone Manganelli, 2003. "The Euro-area Financial System: Structure, Integration, and Policy Initiatives," Oxford Review of Economic Policy, Oxford University Press, vol. 19(1), pages 180-213.
- Mariassunta Giannetti & Luigi Guiso & Tullio Jappelli & Mario Padula & Marco Pagano, 2002. "Financial Market Integration, Corporate Financing and Economic Growth," European Economy - Economic Papers 179, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- Hartmann, Philipp & Manna, Michele & Manzanares, Andrés, 2001.
"The microstructure of the euro money market,"
Working Paper Series
0080, European Central Bank.
- Bracker, Kevin & Docking, Diane Scott & Koch, Paul D., 1999. "Economic determinants of evolution in international stock market integration," Journal of Empirical Finance, Elsevier, vol. 6(1), pages 1-27, January.
- Chelley-Steeley, Patricia L & Steeley, James M, 1999. "Changes in the Comovement of European Equity Markets," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 473-88, July.
- Chen, Nai-Fu & Roll, Richard & Ross, Stephen A, 1986. "Economic Forces and the Stock Market," The Journal of Business, University of Chicago Press, vol. 59(3), pages 383-403, July.
When requesting a correction, please mention this item's handle: RePEc:anc:wpaper:201. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maurizio Mariotti)
If references are entirely missing, you can add them using this form.