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EC economic and monetary integration: Implications for European equity investors

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  • Johnson, Robert
  • Lindvall, John
  • Soenen, Luc

Abstract

Robert Johnson, John Lindvall and Luc Soenen investigate the impact of continued economic and monetary integration within the European Community on the risk/return characteristics of its equity markets. Equity markets in different EC countries are becoming more similar in terms of risk and return. However, the risk of investing in EC equity markets is not decreasing over time. On the other hand, we find that currency risk has decreased and that the compounding effect of exchange rate risk magnifying stock market risk is decreasing. Despite the greater similarity of the different EC stock and currency markets in terms of risk and return characteristics, investors from EC countries can significantly reduce their risk by diversifying their equity investments across the range of EC country stock markets.

Suggested Citation

  • Johnson, Robert & Lindvall, John & Soenen, Luc, 1994. "EC economic and monetary integration: Implications for European equity investors," European Management Journal, Elsevier, vol. 12(1), pages 94-101, March.
    • Handle: RePEc:eee:eurman:v:12:y:1994:i:1:p:94-101
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    Cited by:

    1. Aloui, Riadh & Hammoudeh, Shawkat & Nguyen, Duc Khuong, 2013. "A time-varying copula approach to oil and stock market dependence: The case of transition economies," Energy Economics, Elsevier, vol. 39(C), pages 208-221.
    2. Chee Wooi Hooy, 2008. "Does trade regionalism increase stock market segmentation within a trading bloc?," International Economic Journal, Taylor & Francis Journals, vol. 22(1), pages 113-126.
    3. Gornik-Tomaszewski, Sylwia & Rozen, Etzmun S., 1999. "Pricing of Foreign GAAP Earnings in U.S. Capital Market Prior to the SEC Required Reconciliation Disclosure," The International Journal of Accounting, Elsevier, vol. 34(4), pages 539-556, 010.

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