The Impact of the Euro on Equity Markets

Lorenzo Cappiello, Arjan Kadareja and Simone Manganelli

Journal of Financial and Quantitative Analysis, 2010, vol. 45, issue 2, 473-502

Abstract: This paper investigates whether comovements between euro area equity returns at national and industry level changed after the introduction of the euro. By adopting a regression quantile-based methodology, we find that after 1999 the degree of comovements among euro area national equity markets was augmented. By explicitly controlling for the impact of global factors, we show that this result cannot be explained by recent worldwide trends. A more refined analysis based on an industry breakdown suggests that the increase in national index comovements is mainly driven by financial, industrial, and consumer services sectors.

Date: 2010
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