COMMON STOCHASTIC TRENDS AMONG THE CYPRUS STOCK EXCHANGE AND THE ASE, LSE AND NYSE

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-8586.2008.00282.x Byline: Eleni Constantinou (*), Avo Kazandjian (*), Georgios P. Kouretas ([dagger]), Vera Tahmazian ([double dagger]) Keywords: cointegration; common trends; identification; international portfolio diversification; international stock markets Abstract: ABSTRACT Common stochastic trends among major international stock price indices have been an intensively analysed issue mainly as a result of the 1987 stock market crash and the need for policy coordination in financial markets. This paper investigates the existence of common stochastic trends among an emerging equity market, the Cyprus Stock Exchange, and three mature equity markets, namely the Athens Stock Exchange (ASE), the London Stock Exchange (LSE) and the New York Stock Exchange (NYSE). Author Affiliation: (*)Department of Business Studies, The Philips College, Nicosia, Cyprus ([dagger])Department of Economics, University of Crete, Rethymno,Greece ([double dagger])Department of Accounting and Finance, The Philips College, Nicosia, Cyprus Article note: Correspondence: Georgios P. Kouretas, Department of Economics, University of Crete, University Campus, GR-74100, Rethymno, Greece. Fax: 28310 77406; Email: kouretas@econ.soc.uoc.gr. This paper is part of the research project, Cyprus Stock Exchange: Evaluation, performance and prospects of an emerging capital market, financed by the Cyprus Research Promotion Foundation under research grant [PI]25/2002. We would like to thank the Cyprus Research Promotion Foundation for generous financial support and the Cyprus Stock Exchange for providing us with its database. The views expressed in this paper do not necessarily reflect those of either the CRPF or CSE. An earlier version of this paper was presented at the 5th International Conference of the EEFS, Heraklio, Greece, 18-21 May 2006, and the 10th International Conference on Macroeconomic Analysis and International Finance, University of Crete, Rethymno, 25-27 May 2006, and thanks are due to conference participants for many helpful comments and discussions. We would also like to thank Panayiotis Diamandis, Dimitris Georgoutsos, Angelos Kanas, Minoas Koukouritakis and Leonidas Zarangas for many helpful comments and discussions. We also thank Minoas Koukouritakis and Manolis Syllignakis for computational assistance. Finally, we thank two anonymous referees for their valuable comments that improved the manuscript substantially. The usual disclaimer applies.