Determinants of European Stock Market Integration

David Büttner () and Bernd Hayo
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David Büttner: Philipps-University Marburg

No 200932, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: We analyse the determinants of stock market integration among EU member states for the period 1999–2007. First, we apply bivariate DCC-MGARCH models to extract dynamic conditional correlations between European stock markets, which are then explained by interest rate spreads, exchange rate risk, market capitalisation, and business cycle synchronisation in a pooled OLS model. By grouping the countries into euro area countries, “old” EU member states outside the euro area, and new EU member states, we also evaluate the impact of euro introduction and the European unification process on stock market integration. We find a significant trend toward more stock market integration, which is enhanced by the size of relative and absolute market capitalisation and hindered by foreign exchange risk between old member states and the euro area. Interest rate spreads and business cycle synchronisation do not appear to play an important role in explaining equity market integration.

Keywords: Stock Market Integration; European Unification; DCC-MGARCH model (search for similar items in EconPapers)
JEL-codes: E44 F3 F36 G15 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2009
New Economics Papers: this item is included in nep-eec, nep-fmk and nep-mac
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Citations: View citations in EconPapers (1)

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https://www.uni-marburg.de/en/fb02/research-groups ... 32-2009_buettner.pdf Second version, 2009 (application/pdf)

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Journal Article: Determinants of European stock market integration (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200932

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