The Core, Periphery, and Beyond: Stock Market Comovements Among EU and Non‐EU Countries

52 Pages Posted: 8 Jan 2019

See all articles by Michael A. Goldstein

Michael A. Goldstein

Babson College - Finance Division

Joseph McCarthy

Bryant University

Alexei G. Orlov

Securities and Exchange Commission

Date Written: February 2019

Abstract

Using linear and nonlinear correlations, copulas, quantile dependence and lower tail dependence, we find that (1) equity markets of the advanced European Union (EU) countries comove more closely with each other than with the peripheral economies, (2) comovements with non‐EU countries are lower, (3) relative comovement structure before, during, and after the global financial crisis has been very stable, and (4) the level of comovements remained virtually the same between the crisis and post‐crisis 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: C14, F30, F37, G10, G15

Suggested Citation

Goldstein, Michael A. and McCarthy, Joseph and Orlov, Alexei G., The Core, Periphery, and Beyond: Stock Market Comovements Among EU and Non‐EU Countries (February 2019). Financial Review, Vol. 54, Issue 1, pp. 5-56, 2019. Available at SSRN: https://ssrn.com/abstract=3311676 or http://dx.doi.org/10.1111/fire.12186

Michael A. Goldstein (Contact Author)

Babson College - Finance Division ( email )

320 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4402 (Phone)
781-239-5004 (Fax)

HOME PAGE: http://faculty.babson.edu/goldstein/

Joseph McCarthy

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917-1284
United States
401-232-6446 (Phone)

Alexei G. Orlov

Securities and Exchange Commission ( email )

100 F Street NE
Washington, DC 20549
United States

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