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Progress Towards to Equity Market Integration in Eastern Europe
Aslanidis, Nektarios; Dungey, Mardi; Savva, Christos S.
Universitat Rovira i Virgili. Departament d'Economia
The advent of the European Union has decreased the diversification benefits available from country based equity market indices in the region. This paper measures the increase in stock integration between the three largest new EU members (Hungary, the Czech Republic and Poland who joined in May 2004) and the Euro-zone. A potentially gradual transition in correlations is accommodated in a single VAR model by embedding smooth transition conditional correlation models with fat tails, spillovers, volatility clustering, and asymmetric volatility effects. At the country market index level all three Eastern European markets show a considerable increase in correlations in 2006. At the industry level the dates and transition periods for the correlations differ, and the correlations are lower although also increasing. The results show that sectoral indices in Eastern European markets may provide larger diversification opportunities than the aggregate market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; Sectoral correlations; New EU Members
339 - Comerç. Relacions econòmiques internacionals. Economia mundial. Màrqueting
Anàlisi de sèries temporals
Models economètrics
Integració econòmica
Integració europea
Finances internacionals
Ampliació de la Unió Europea
República Txeca
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Working Paper
1988 - 0812
Documents de treball del Departament d'Economia;2008-12

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