INTEGRATION OF THE SELECTED SEE EQUITY MARKETS: COINTEGRATION APPROACH
Dragan Tevdovski () and
Prof. Slave Risteski Ph.D.
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Prof. Slave Risteski Ph.D.: University “Ss. Cyril and Methodius” Faculty of Economics
Revista Tinerilor Economisti (The Young Economists Journal), 2010, vol. 1, issue 15S, 137-146
The purpose of this paper is to examine the integration of selected Central and Eastern European equity markets for the period of January 2nd, 2005 to December 30th 2008. The cointegration tests according the Johansen methodology suggest: (1) existence of multilateral integration between selected SEE equity markets, and (2) existence of multilateral integration between the group of selected SEE equity markets and the leading European equity index (FTSE). Error Correction Model is developed to deals with the long-run equilibrium relationships, while providing the possibility of short run divergence. The model allows finding the lead-lag relationships between market indices, or how the turning points in one series precede turning points in the other. These findings have important applications for investors. Integration of the markets implies that there are fewer opportunities to diversify portfolios within the examined markets. The investors should focus more on diversifying across sectors or across regions.
Keywords: cointegration; error correction model; equity markets; SEE (search for similar items in EconPapers)
JEL-codes: C32 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:aio:rteyej:v:1:y:2010:i:15s:p:137-146
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