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Convergence of EMU Equity Portfolios

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  • Giofré, Maela/M.

Abstract

This paper demonstrates that, after integration, equity portfolios of countries that joined the European Monetary Union have converged at faster rate than those of NON EMU countries. This outcome canbe interpreted as a combination of the convergence of inflation rates and the convergence of investment barriers. On the one hand, the common monetary policy might have driven a stronger comovement in inflation rates, leading to increasingly similar hedging strategies among member countries. On the other hand, exposure to the common currency might have homogenized bilateral investment barriers, thus inducing increasingly similar portfolio allocations among member countries. We find that the comovement of inflation rates has not significantly increased after EMU inception, pointing toward an exclusive role for convergence in investment barriers.

Suggested Citation

  • Giofré, Maela/M., 2008. "Convergence of EMU Equity Portfolios," MPRA Paper 13927, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13927
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    References listed on IDEAS

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    Cited by:

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    2. Donny TANG, 2020. "What determines the portfolio investment flows to Central and Eastern European Countries in the European Union 2001-2017?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(625), W), pages 21-42, Winter.

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    More about this item

    Keywords

    financial integration; EMU; inflation hedging; investment barriers;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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