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Have the GIPSI settled down? Breaks and multivariate stochastic volatility models for, and not against, the European financial integration

Lookup NU author(s): Professor Bartosz GebkaORCiD

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Abstract

We investigate the integration of the European peripheral financial markets with Germany, France, and the UK using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models. Our findings suggest that financial integration intensified in anticipation of the Euro, further strengthened by the EMU inception, and amplified in response to the 2007/8 financial crisis. Hence, no evidence is found of decoupling of the equity markets in more troubled European countries from the core. Interestingly, the UK, despite staying outside the EMU, is not worse integrated with the GIPSI than Germany or France.

Publication metadata

Author(s): Gebka B, Karoglou M

Publication type: Article

Publication status: Published

Journal: Journal of Banking & Finance

Year: 2013

Volume: 37

Issue: 9

Pages: 3639-3653

Print publication date: 01/09/2013

ISSN (print): 0378-4266

ISSN (electronic): 1872-6372

Publisher: Elsevier BV

URL: http://dx.doi.org/10.1016/j.jbankfin.2013.04.035

DOI: 10.1016/j.jbankfin.2013.04.035

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