The Core, Periphery, and Beyond: Stock Market Comovements among EU and non-EU Countries
Posted: 9 Apr 2014 Last revised: 17 Sep 2018
Date Written: September 2, 2018
Using linear and nonlinear correlations, copulas, quantile dependence and lower-tail dependence, we find that (i) equity markets of the advanced European Union (EU) countries comove more closely with each other than with the peripheral economies, (ii) comovements with non-EU countries are lower, (iii) relative comovement structure before, during, and after the global financial crisis has been very stable, and (iv) the level of comovements remained virtually the same between the crisis and postcrisis periods. Our results are robust to controlling for Fama-French, U.S. and global risk factors, as well as monetary policy, market interest rates, exchange rates, and uncertainty.
Keywords: Financial interdependence, comovements, European stock markets, PIIGS, Brexit, copulas, global financial crisis
JEL Classification: G10, G15, F30, F37, C14
Suggested Citation: Suggested Citation