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Integration Of Smaller European Equity Markets :
A Time-Varying Integration Score Analysis

Gregory Birg
Brian M. Lucey IIIS Discussion Paper No. 136


The objective of this paper is to study capital market integration in smaller european countries and its implications for an international portfolio investment allocation. A time-varying analysis based on Barari (2004) suggests that the markets have recently started moving towards international financial integration. Results vary from country to country and sample countries can be broken down into distinctive groups according to their recent integration score performance: a) countries which are becoming increasingly integrated with both regional European and international equity markets (Estonia, Hungary, Czech Republic, Lithuania, Poland) b) countries which have becoming increasingly integrated with the regional market, while growing segmented with the world market (Latvia, Slovakia, Slovenia). This is an encouraging indicator in that none of the countries have been growing segmented from the European equity markets since the EU accession.
Keywords: Stock Market Integration, Portfolio Diversification, Smaller European markets, Time-varying methods. JEL classification: G11;G12;G15

Last updated 28 August 2014 by IIIS (Email).