Stock market integration for the transition economies: Time-varying conditional correlation approach

Abstract

This is the accepted version of the following article: WANG, P. and MOORE, T. (2008), Stock market integration for the transition economies: Time-varying conditional correlation approach. The Manchester School, 76: 116–133. doi: 10.1111/j.1467-9957.2008.01083.x, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/j.1467- 9957.2008.01083.x/abstract.In this paper, we investigate the extent to which the three emerging Central Eastern European stock markets have become integrated with the aggregate eurozone market over the sample period from 1994 to 2006 by utilizing the dynamic conditional correlation. We find a higher level of the stock market correlation during the period after the Asian and Russian crises and also during the post-entry period to the European Union. It is found that financial market integration seems to be a largely self-fuelling process, depending on existing levels of financial sector development for the Czech Republic and Hungary