The effect of the EMU on short and long-run stock market dynamics: New evidence on financial integration
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comunitat-uji-handle2:10234/8648
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INVESTIGACIONMetadata
Title
The effect of the EMU on short and long-run stock market dynamics: New evidence on financial integrationDate
2009Publisher
Inderscience PublishersISSN
1756-7130Type
info:eu-repo/semantics/articlePublisher version
http://inderscience.metapress.com/content/c7p34rtr2264wk64/Version
info:eu-repo/semantics/submittedVersionAbstract
This paper deals with the time evolution of stock market integra- tion around the introduction of the euro. In particular we test whether the degree of integration between the main eurozone countries increased after ... [+]
This paper deals with the time evolution of stock market integra- tion around the introduction of the euro. In particular we test whether the degree of integration between the main eurozone countries increased after European monetary union. The contribution of the paper to the extant literature is twofold: a) first, we take into account the poten- tial long-run equilibrium relationship between stock indices allowing for structural changes in the cointegration space that might capture the ef- fect of the introduction of the euro, and b)we formally test the existence of greater financial integration after European monetary union across the main member countries and between these members and the UK. Empirical evidence reveal the existence of long-run equilibrium relation- ships between European stock markets even before the introduction of the euro. Our empirical findings suggest that financial integration is not the direct consequence of the removal of exchange rate risk due to currency unification. Rather, it arises as a result of macroeconomic con- vergence. This aspect is corroborated by the nature of the principal component structure of estimated conditional correlations. [-]
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International Journal of Financial Markets and Derivatives, 1, 1, p. 75-95Rights
Copyright 2009 Inderscience Enterprises
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This item appears in the folowing collection(s)
- ECO_Articles [696]
- COFIN_Articles [218]