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GEMF

Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 01 de 2013

   

The International Integration of the Eastern Europe

and Two Middle East Stock Markets


José Soares da Fonseca

Faculdade de Economia/GEMF, Universidade de Coimbra

Abstract:
This article studies the international integration of twelve Eastern Europe Stock Markets and two Middle East Stock Markets. It is commonly accepted that the returns in these markets have a low correlation with the other markets, which means that they are still weakly integrated in the world financial market. This assumption is the object of the empirical analysis in the present article, in which the co-integration of each of these national stock markets with the international market is estimated. Co-integration is a well adapted methodology to study the international integration of stock markets, since it puts in evidence, simultaneously, the long-term relation between the stock prices of a domestic market and those representing the international market and the short-term relation between the changes in those prices. The results obtained show that, in general, these stock markets are co-integrated with one or more international indexes.

JEL Classification: F36, F37, G15.

Keywords:
Financial Integration, Stock Markets, Structure Breaks.

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