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The Impact of the Euro on Equity Markets

Published online by Cambridge University Press:  19 February 2010

Lorenzo Cappiello ,
Arjan Kadareja  and
Simone Manganelli
Lorenzo Cappiello
Affiliation:
DG-Economics, European Central Bank (ECB), Kaiserstrasse 29, 60 311 Frankfurt am Main, Germany. lorenzo.cappiello@ecb.europa.eu
Arjan Kadareja
Affiliation:
DG-Economics, European Central Bank (ECB), Kaiserstrasse 29, 60 311 Frankfurt am Main, Germany. simone.manganelli@ecb.europa.eu
Simone Manganelli
Affiliation:
Bank of Albania, “Sheshi Skenderbej,” No. 1, and University of New York, Tirana, Albania. kadareja@yahoo.com
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Abstract

This paper investigates whether comovements between euro area equity returns at national and industry level changed after the introduction of the euro. By adopting a regression quantile-based methodology, we find that after 1999 the degree of comovements among euro area national equity markets was augmented. By explicitly controlling for the impact of global factors, we show that this result cannot be explained by recent worldwide trends. A more refined analysis based on an industry breakdown suggests that the increase in national index comovements is mainly driven by financial, industrial, and consumer services sectors.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 45 , Issue 2 , April 2010 , pp. 473 - 502
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2010

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