Integration Between the Baltic and International Stock Markets

Per-Ola Maneschiöld

Emerging Markets Finance and Trade, 2006, vol. 42, issue 6, 25-45

Abstract: Using cointegration tests, this paper analyzes the existence of long-run relationships among Baltic stock markets and major international stock markets, including the United States, Japan, Germany, the United Kingdom, and France. Bivariate and multivariate cointegration tests indicate a common trend linking Latvia to European markets. Evidence indicates that the German market dominates this long-run relationship. In general, short-term Granger causality indicates causality running from the European markets to the Baltic markets, as well as among the Baltic states, excepting Latvian and Lithuanian short-term effects on the Estonian market. Overall, the results suggest that international investors can obtain diversification benefits given a long-term investment horizon because of the low degree of integration between the Baltic and international capital markets.

Keywords: Baltic states; cointegration; stock markets (search for similar items in EconPapers)
Date: 2006
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