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Stock market integration and diversification possibilities during financial crises: Evidence from Balkan countries

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  • Zdravkovski, Aleksandar

Abstract

This paper investigates the short- and long-term linkage among the Macedonian, Croatian, Slovenian, Serbian, and Bulgarian equity markets during the period of 4 October 2005 to 31 December 2015. In order to assess the impact of the recent financial crises on the interconnection among the examined Balkan stock markets, the studied period is segmented into pre-, during, and post-crisis period. Johansen cointegration test finds no evidence of cointegration during the pre- and post-crisis periods. However, during the latest financial crises, the empirical findings support the existence of three cointegration vectors. This means that the recent global financial crisis and the subsequent euro crisis strengthened the connection between the investigated stock markets, thus decreasing the diversification possibilities that can be acquired in these markets. Furthermore, innovation accounting analysis reveals that during periods of financial turmoil, the Macedonian stock market is positively and actively influenced by the Croatian and Serbian markets. A significant implication of these results is that the integration between Balkan stock markets tends to alter over time, particularly during stages of financial disturbances.

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  • Zdravkovski, Aleksandar, 2016. "Stock market integration and diversification possibilities during financial crises: Evidence from Balkan countries," MPRA Paper 72182, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:72182
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    Cited by:

    1. Milena М. Kovachevich, 2021. "Economic Growth In The Eurozone And On The Balkans: A Cointegration Analysis," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 3 Year 20, pages 59-70.
    2. Ani Stoykova & Mariya Paskaleva, 2018. "Correlation Dynamics between Southeast European Capital Markets," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 49-82.
    3. Mariya Paskaleva & Ani Stoykova, 2021. "The Influence of Uncertainty on Market Efficiency: Evidence from Selected European Financial Markets," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 175-198.

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    More about this item

    Keywords

    Balkan stock markets; Diversification; Financial crises; Cointegration; Innovation accounting;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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