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The Degree of Integration of the Bulgarian and Croatian Equity Markets into the Eurozone Share Equity Market

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  • Joanna Bukowska

Abstract

Purpose: This paper attempts to answer the question to what degree the equity markets of two countries aspiring to join the eurozone are integrated into the zone’s share exchange market. Design/Methodology/Approach: An econometric model based on the model of increased impact of the common news component on stock market yields by means of GARCH is applied to the analysis of the degree of integration of the Bulgarian and Croatian equity markets into the eurozone equity market. Monthly data on the yields on CROBEX (Croatia), SOFIX (Bulgaria), DJ EUROSTOXX (the euro area), DJ COMPOSITE AVERAGE (the United States) are used. Findings: Both the Bulgarian and Croatian equity markets are integrated into the eurozone equity market to a low degree, which means idiosyncratic shocks play a dominant role in determining yields on the indices in these countries. Practical Implications: The results presented in this paper can be employed by economists, politicians, and business practitioners who deal with the integration of financial markets including equity markets. Originality/Value: This study addresses two countries that are aspiring and closest to joining the eurozone, hence research into the degree of integration of the equity markets of both these countries into the eurozone market is important.

Suggested Citation

  • Joanna Bukowska, 2021. "The Degree of Integration of the Bulgarian and Croatian Equity Markets into the Eurozone Share Equity Market," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 4), pages 269-277.
    • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:special4:p:269-277
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    References listed on IDEAS

    as
    1. Büttner, David & Hayo, Bernd, 2011. "Determinants of European stock market integration," Economic Systems, Elsevier, vol. 35(4), pages 574-585.
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    3. Baele, Lieven & Ferrando, Annalisa & Hördahl, Peter & Krylova, Elizaveta & Monnet, Cyril, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
    4. Jappelli, Tullio & Pagano, Marco, 2008. "Financial market integration under EMU," CFS Working Paper Series 2008/33, Center for Financial Studies (CFS).
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    8. Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
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    More about this item

    Keywords

    Degree of integration; equity market; shocks; GARCH model.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • F15 - International Economics - - Trade - - - Economic Integration
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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