Diversification benefits in the smaller European stock markets

Markellos, Raphael N. and Siriopoulos, Costas (1997) Diversification benefits in the smaller European stock markets. International Advances in Economic Research, 3 (2). pp. 142-153. ISSN 1083-0898

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Abstract

This paper examines the diversification benefits available to U.S. and Japanese investors over the period 1974-94 in seven of the smaller European stock markets (SESMs): Austria, Belgium, Greece, Holland, Ireland, Italy, and Spain. With reference to a simplified International CAPM that accommodates both contemporaneous and delayed information flows, we employ correlation, principal components, and cointegration analysis in studying monthly observations from national basket indices. The empirical evidence is conclusive in showing that the SESMs have behaved differently, at least since the October 1987 crash, with stronger contemporaneous interdependencies and integration between them and with the U.S. market. Cointegration analysis found no significant common trend shared between the SESMs and the U.S. and Japanese markets. We conclude that despite the increasing international integration there still exist opportunities for diversification investment in the smaller and less studied European stock markets.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: Pure Connector
Date Deposited: 04 Dec 2013 13:24
Last Modified: 31 Oct 2019 14:18
URI: https://ueaeprints.uea.ac.uk/id/eprint/45296
DOI: 10.1007/BF02294935

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