Have the GIPSI settled down? Breaks and multivariate stochastic volatility models for, and not against, the European financial integration

Bartosz Gębka, Michail Karoglou

Research output: Contribution to journalArticle

Abstract

We investigate the integration of the European peripheral financial markets with Germany, France, and the UK using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models. Our findings suggest that financial integration intensified in anticipation of the Euro, further strengthened by the EMU inception, and amplified in response to the 2007/2008 financial crisis. Hence, no evidence is found of decoupling of the equity markets in more troubled European countries from the core. Interestingly, the UK, despite staying outside the EMU, is not worse integrated with the GIPSI than Germany or France.

Original languageEnglish
Pages (from-to)3639-3653
Number of pages15
JournalJournal of Banking and Finance
Volume37
Issue number9
Early online date11 May 2013
DOIs
Publication statusPublished - 2013

Fingerprint

France
Multivariate stochastic volatility
Financial integration
Stochastic volatility model
Germany
European countries
Integrated
Financial crisis
Structural breaks
Anticipation
Decoupling
Equity markets
Financial markets

Keywords

  • break tests
  • EMU
  • european integration
  • financial spillovers
  • stochastic volatility models

Cite this

@article{1825c3d3b0954d17b567e7a7d468b4a5,
title = "Have the GIPSI settled down? Breaks and multivariate stochastic volatility models for, and not against, the European financial integration",
abstract = "We investigate the integration of the European peripheral financial markets with Germany, France, and the UK using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models. Our findings suggest that financial integration intensified in anticipation of the Euro, further strengthened by the EMU inception, and amplified in response to the 2007/2008 financial crisis. Hence, no evidence is found of decoupling of the equity markets in more troubled European countries from the core. Interestingly, the UK, despite staying outside the EMU, is not worse integrated with the GIPSI than Germany or France.",
keywords = "break tests, EMU, european integration, financial spillovers, stochastic volatility models",
author = "Bartosz Gębka and Michail Karoglou",
year = "2013",
doi = "10.1016/j.jbankfin.2013.04.035",
language = "English",
volume = "37",
pages = "3639--3653",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",
number = "9",

}

TY - JOUR

T1 - Have the GIPSI settled down? Breaks and multivariate stochastic volatility models for, and not against, the European financial integration

AU - Gębka, Bartosz

AU - Karoglou, Michail

PY - 2013

Y1 - 2013

N2 - We investigate the integration of the European peripheral financial markets with Germany, France, and the UK using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models. Our findings suggest that financial integration intensified in anticipation of the Euro, further strengthened by the EMU inception, and amplified in response to the 2007/2008 financial crisis. Hence, no evidence is found of decoupling of the equity markets in more troubled European countries from the core. Interestingly, the UK, despite staying outside the EMU, is not worse integrated with the GIPSI than Germany or France.

AB - We investigate the integration of the European peripheral financial markets with Germany, France, and the UK using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models. Our findings suggest that financial integration intensified in anticipation of the Euro, further strengthened by the EMU inception, and amplified in response to the 2007/2008 financial crisis. Hence, no evidence is found of decoupling of the equity markets in more troubled European countries from the core. Interestingly, the UK, despite staying outside the EMU, is not worse integrated with the GIPSI than Germany or France.

KW - break tests

KW - EMU

KW - european integration

KW - financial spillovers

KW - stochastic volatility models

UR - http://www.scopus.com/inward/record.url?scp=84879582688&partnerID=8YFLogxK

U2 - 10.1016/j.jbankfin.2013.04.035

DO - 10.1016/j.jbankfin.2013.04.035

M3 - Article

VL - 37

SP - 3639

EP - 3653

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

IS - 9

ER -