Links between the Eurozone Stock Markets: A New Perspective, Considering the Capitalization Level

• Autor(a) principal: Gabriel, Vítor
• Data de Publicação: 2017
• Outros Autores: Saraiva, Helena
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10314/3967
• topic: European stock markets; cap segments; vector autoregressive; cointegration.

This paper examines short-term and long-term linkages among stock markets within EMU, taking into account the business capitalization. According to this objective, we have analysed four capitalization segments, corresponding to the Micro, Small, Mid and Large Caps indices, in the period between November 2007 and December 2013. In order to identify the existence of interdependencies and short-term links between the European indices, we have used a vector autoregressive error-correction model, the concept of Granger causality and the impulseresponse functions. We have concluded that the Large Cap described relatively autonomous movements and contained information that helped to explain the changes in other indices. With regard to the existence of long-term connections, the usual cointegration tests were used, which showed that the segment index of the largest capitalizations described a di erent route compared to the indices of the two segments with smaller capitalizations. This proves to be particularly important for an international portfolio diversi cation strategy.