Melbourne Institute Working Paper Series Database (1984 - 2010)

Melbourne Institute Working Paper No. 25/2007

Co-movement and Integration among Developed Equity Markets

by

Sarantis Tsiaplias

Date: August 2007

Abstract: In contrast to the existing focus on intertemporal global integration, this paper examines equity market integration from the dual perspectives of the global-regional dichotomy and the equity market regime structure. Results are obtained using an exact Kalman filter with common regimes and GARCH innovations. According to the findings, market volatility during periods of low global and European volatility tends to be dominated by idiosyncratic shocks. In contrast, common factors are generally dominant for medium-level global and European shocks. Finally, although the importance of the common factors has risen, there is no clear evidence of a global or European integration trend.

 

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