EIRP Proceedings, Vol 10 (2015)

Abstract

The purpose of this paper is to analyse the linkages between Emerging European stock markets and the developed ones, in relatively stable times that followed the global economic crisis. One of the main reasons that served as an argument in studying stock market integration relies in the prior contradictory results regarding the regional versus international interdependencies. Using a Vector Error Correction Model we tested if the Central and Eastern European markets are more internationally or regional integrated. Our findings suggest that the stock exchanges from CEE react mainly to the arrival of price innovations from the most mature market in the EU perimeter. The main contribution of this paper is that it provides further evidence on stock market integration and correlations in emerging stock markets, emphasizing new connections between London Stock Exchange and the other CEE stock markets. The results are of particular interest for both portfolio managers and policymakers.