Date of Award


Degree Type


Degree Name

Doctor of Philosophy


School of Accounting, Finance and Economics


Business and Law

First Advisor

Professor David Allen

Second Advisor

Associate Professor Robert Powell

Third Advisor

Dr Ghialy Yap


This dissertation examines the interaction between European Emerging markets including cointegration, volatility, correlation and spillover effects. This study is also concerned with the process of the enlargement of the European Union and how this affects the emerging markets of newcomers. The twelve emerging markets studied are Bulgaria, the Czech Republic, Cyprus, Estonia, Hungry, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia, which are all progressing very rapidly in their reforms and domestic economic stability.

The majority of prior studies on stock market comovements and integration have concentrated on mature developed markets or the advanced emerging markets of the Czech Republic, Hungary and Poland whilst the behaviour and interrelationship of other Central and Eastern European equity markets has been neglected. This study fills that gap.

There are two key aspects investigated in this study. Firstly the cointegration between studied emerging markets and secondly the volatility and spillover effects.

The cointegration analysis examines the short and long run behaviour of the twelve emerging stock markets and assesses the impact of the EU on stock market linkages as revealed by the time series behaviour of their stock market indices. The adopted time- series framework incorporates the Johansen procedure, Granger Causality tests, Variance Decompositions and Impulse Response analyses. The cointegration results for both pre- and post- EU periods confirm the existence of long run relationships between markets. Granger Causality relationships are indentified among the most advanced emerging markets. The Variance Decomposition analyses find evidence of regional integration amongst the markets. Furthermore, the Impulse Response function illustrates that the shocks in returns for all twelve markets persist for very short time periods.

The volatility and spillover analysis applies several univariate models of Autoregressive Conditional Heteroscedasticity, including GARCH, GJR and EGARCH. The models used in the analysis of cross market effects include CCC, diagonal BEKK, VARMA GARCH and VARMA AGARCH. Overall, the econometric analysis using these models shows stock market integration during the pre-EU period, however interdependence of the markets is established for the post-EU period. The results provide important information on the impact of the accession of new countries to the EU, with clear evidence of stability in Central and Eastern Europe markets and integration within the region.

This study has important implications for investors wishing to diversify across national markets, such as the implications of growing asset correlations, if they are displayed, and whether investors should diversify outside the Central and Eastern European countries. It could be argued that the former Eastern block economies constitute emerging markets which typically offer attractive risk adjusted returns for international investors. Moreover, stock market comovement is of considerable interest to policy makers from a perspective of the effects on the macroeconomy, the planning of monetary policy and impact of the degree of stock market comovements on the stability of international monetary policy.