Evidence on long-run and short-run relationship among the major stock indexes in the highly concentrated Athens stock exchange (ASE) is provided utilizing daily data for the period 01/01/96 to 31/12/03. The findings suggest that even though the sector indexes do not show a consistent and strong long-term relationship, the banking sector seems to have a strong influence on returns and volatility of other sectors at least in the short-run. The variance decomposition analysis confirms that although the variance of returns for most sectors is largely influenced by their own innovations, banking sector is able to explain 25% of variance of construction and insurance sectors and around 15% of the variance of industrial, investment and the holding sectors. The leading role of the banking sector implies that changes in the banking sector index could be potentially used in predicting short term movements in other sector indexes confirming that the ASE is not weak form efficient
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