engleski

Capital Market Cointegration of Old and New EU Member States

The author investigates the degree of capital market cointegration of old and new EU member states, and examines whether, and to what extent, the global financial crisis had an effect on it. Capital markets are completely integrated if assets of equal risk have identical expected returns, irrespective of the location of the capital market. Therefore the risk that the investor agrees to take in the integrated international market is the result of common factors and it is not possible to diversify the risk. The degree of financial integration of capital markets can be determined by analyzing the movement of market indices. In this paper the multivariate VAR(5) econometric models were set up and tested in order to analyze the multilateral integration of selected capital markets of developed European countries (Britain and Germany) and selected - new EU member states (Slovakia, Czech Republic, Slovenia and Hungary). Input data of the model are daily stock market indices (FTSE, DAX, BUX, SAX, PX and SBI20) for the time period January 2001 to October 2009. The study was conducted in three stages: In the first stage each series index was tested for the presence of unit roots, in order to determine whether the time series was stationary or not (to do this, ADF and Phillips - Perron tests were used). In the second stage multivariate VAR(5) models were set up, to which the Johansen method for determining cointegration was applied. In the third stage of the research process, the dynamics of the integration of underlying capital markets was determined by calculating the relevant trace value and dividing it by the critical  value.

cointegration; financial crisis; VAR; capital market; CEE

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