An ever-closer union? Examining the evolution of linkages of European equity markets via minimum spanning trees

Claire G. Gilmore, Brian Lucey and Marian Boscia

Physica A: Statistical Mechanics and its Applications, 2008, vol. 387, issue 25, 6319-6329

Abstract: The concept of a minimum spanning tree (MST) is used to study the process of comovements for 21 European Union stock market indices. We show how the minimum spanning tree and its related hierarchical tree evolve over time and describe the dynamics. Over the period studied, 1999–2006, the French equity market provides the main linkages in the system. The 2004 Accession states are more loosely connected to the other markets; they form two groupings, with the Czech Republic, Hungary, and Poland having tighter links to the main markets than the remaining Accession markets. Shorter distances between markets indicate a potential reduction of the benefits of international portfolio diversification in European markets, with the possible exception of those markets at the outer limits of the MST.

Keywords: Econophysics; Minimum spanning trees (search for similar items in EconPapers)
Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:387:y:2008:i:25:p:6319-6329

DOI: 10.1016/j.physa.2008.07.012

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