Equity market integration: the new emerging economy of Montenegro

Vassilios Papavassiliou

Review of Accounting and Finance, 2014, vol. 13, issue 3, 291-306

Abstract: Purpose - – The purpose of this paper is to examine the level of capital market integration between the Montenegrin stock market and a number of European Union (EU) countries and the USA. Design/methodology/approach - – The authors use an equity data set at the daily frequency from 12 countries and 4 broad regions, spanning the period from March 2003 to September 2008. They investigate long-run and short-run dynamics using cointegration techniques, Granger causality tests and vector error correction models. Findings - – The authors provide evidence for the existence of a long-run equilibrium between Montenegro and the developed countries of Western Europe and the USA. The investigation of short-run dynamics reveals that Montenegro follows an autonomous path, influenced mainly by domestic developments. Originality/value - – This is the first study on the Montenegrin stock market which has been neglected by the academic community. Montenegro’s accession in the EU is imminent; thus the study of the level of its integration with the rest of EU countries, before its actual accession, is useful for regulators and policymakers. Various lessons of a more general nature can also be drawn from the analysis of this paper.

Keywords: Cointegration; Emerging equity markets; EU enlargement; Southeastern Europe (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rafpps:v:13:y:2014:i:3:p:291-306

DOI: 10.1108/RAF-05-2013-0073

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