Country and Industry Convergence of Equity Markets: International Evidence from Club Convergence and Clustering

Nicholas Apergis (), Christina Christou () and Stephen Miller
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Christina Christou: Department of Banking and Financial Management, University of Piraeus

No 1105, Working Papers from University of Nevada, Las Vegas , Department of Economics

Abstract: This study employs the panel convergence methodology developed by Phillips and Sul (2007) to explore the convergence dynamics of international equity markets. The analysis considers both country and industry effects. While traditional portfolio management strategies usually follow a top-down procedure, assuming that country-level effects drive financial aggregates, e.g. stock returns, our empirical results suggest that the equity markets of 35 of the 42 counties in our sample do form a unified convergence club. The empirical findings also show more numerous stock-price convergence clubs in certain industries. That is, industry factors play a more important role in explaining the actual divergence in stock prices than does the stock market itself. Conversely, the volatility of stock prices exhibits much more evidence of convergence than stock prices. These findings should assist portfolio managers in the design and implementation of appropriate portfolio management strategies. Regulatory authorities also can benefit in the design of financial regulation.

Keywords: equity markets convergence; industry effects; international equity markets; panel convergence methodology (search for similar items in EconPapers)
JEL-codes: C32 C33 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Country and industry convergence of equity markets: International evidence from club convergence and clustering (2014)
Working Paper: Country and Industry Convergence of Equity Markets: International Evidence from Club Convergence and Clustering (2012)
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