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The Integration of European Stock Markets and Market Timing

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  • José Soares Fonseca

    () (GEMF and Faculdade de Economia, Universidade de Coimbra)

Abstract

In this research, a European index and a world index were used to test the integration of the national stock markets of fourteen EU countries into the world stock market. A market timing procedure was used to detect differences of performance between the national indexes. The main conclusions drawn are that the European factor is important in explaining the returns of all the national indexes, but the world portfolio seems unnecessary in the cases of nine countries whose stock markets are embedded in the global European stock market. Differences of performance were also detected: the market timing effect being particularly evident in relation to the European market portfolio. Non-participation in the single currency does not seem to have a perceptible influence on the results.

Suggested Citation

  • José Soares Fonseca, 2006. "The Integration of European Stock Markets and Market Timing," GEMF Working Papers 2006-05, GEMF, Faculty of Economics, University of Coimbra.
  • Handle: RePEc:gmf:wpaper:2006-05
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    5. Bekaert, Geert & Harvey, Campbell R, 1995. " Time-Varying World Market Integration," Journal of Finance, American Finance Association, vol. 50(2), pages 403-444, June.
    6. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    7. Glassman, Debra A. & Riddick, Leigh A., 2001. "What causes home asset bias and how should it be measured?," Journal of Empirical Finance, Elsevier, vol. 8(1), pages 35-54, March.
    8. Glassman, Debra A. & Riddick, Leigh A., 1996. "Why empirical international portfolio models fail: evidence that model misspecification creates home asset bias," Journal of International Money and Finance, Elsevier, vol. 15(2), pages 275-312, April.
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