Non-Synchronous Trading and Testing for Market Integration in Central European Emerging Markets

LIFE Working Paper No. 04-017

48 Pages Posted: 20 Oct 2005

See all articles by Anna (Ania) Zalewska

Anna (Ania) Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management

Peter C. Schotman

Maastricht University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 15, 2006

Abstract

The paper contributes to the literature on integration of stock markets by addressing the issue of non-synchronous trading. We argue that controlling for time differences in trading hours of stock markets is important and show that time-adjustment improves estimates of market integration. We also show that using weekly frequency does not sidestep the consequences of the time-match problem but leads to significant loss of information. We show that the nature of integration of stock exchanges operating in the Czech Republic, Hungary, and Poland with the stock markets of Germany, UK and US in the period 1994-2004 is very dynamic. Finally, the study shows that the autocorrelation of returns on the main market indexes of the emerging markets have declined over time.

Keywords: market integration, market efficiency, non-synchronous trading, emerging markets, Kalman filter

JEL Classification: G14, G15

Suggested Citation

Zalewska, Anna and Schotman, Peter C., Non-Synchronous Trading and Testing for Market Integration in Central European Emerging Markets (April 15, 2006). LIFE Working Paper No. 04-017, Available at SSRN: https://ssrn.com/abstract=823965 or http://dx.doi.org/10.2139/ssrn.823965

Anna Zalewska (Contact Author)

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
+44 0 1225 384354 (Phone)
+44 0 1226 384354 (Fax)

Peter C. Schotman

Maastricht University - Department of Finance ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 388 3862 (Phone)
+31 43 388 4875 (Fax)

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