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

Patricia L. Chelley-Steeley

Research output: Contribution to journalArticle

Abstract

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
Volume24
Issue number5
DOIs
Publication statusPublished - Sep 2005

Fingerprint

Smooth transition
Hungary
Equity market integration
Modeling
European stock markets
Poland
Equity markets
Integrated
Czech Republic
Return on equity
Market segmentation
Factors
Russia
Logistics
Variance decomposition
Vector autoregressive
Eastern Europe
Comovement

Keywords

  • equity market integration
  • international diversification
  • logistic trend function

Cite this

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Modeling equity market integration using smooth transition analysis : a study of Eastern European stock markets. / Chelley-Steeley, Patricia L.

In: Journal of International Money and Finance, Vol. 24, No. 5, 09.2005, p. 818-831.

Research output: Contribution to journalArticle

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