Modeling equity market integration using smooth transition analysis: a study of Eastern European stock markets

Patricia L. Chelley-Steeley

Research output: Contribution to journalArticle


This paper assesses the extent to which the equity markets of Hungary, Poland the Czech Republic and Russia have become less segmented. Using a variety of tests it is shown there has been a consistent increase in the co-movement of some Eastern European markets and developed markets. Using the variance decompositions from a vector autoregressive representation of returns it is shown that for Poland and Hungary global factors are having an increasing influence on equity returns, suggestive of increased equity market integration. In this paper we model a system of bivariate equity market correlations as a smooth transition logistic trend model in order to establish how rapidly the countries of Eastern Europe are moving away from market segmentation. We find that Hungary is the country which is becoming integrated the most quickly. © 2005 ELsevier Ltd. All rights reserved.

Original languageEnglish
Pages (from-to)818-831
Number of pages14
JournalJournal of International Money and Finance
Issue number5
Publication statusPublished - Sep 2005



  • equity market integration
  • international diversification
  • logistic trend function

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