The Impact of the EMUon the Structure of European Equity Returns: An Empirical Analysis of the First 21 Months

Author/Editor:

Thomas Kraus

Publication Date:

June 1, 2001

Electronic Access:

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Summary:

Using symmetric data sets of 92 weekly return observations before and after the introduction of the euro, the paper analyzes the impact of the new currency on the return structure of equity markets in the European Monetary Union. Variance decompositions, cluster analyses, and principle component analyses are used to explore the changes in the structural relations. European industry factors are found to have dramatically increased in importance with the launch of the single currency, and a new 'country-size' factor in European stock returns is detected. Furthermore, inner-European correlations are documented to have been reduced sharply with the start of the monetary union.

Series:

Working Paper No. 2001/084

Subject:

Currencies Econometric analysis Economic sectors Factor models Financial institutions Financial markets Industrial sector Money Stock markets Stocks

English

Publication Date:

June 1, 2001

ISBN/ISSN:

9781451850642/1018-5941

Stock No:

WPIEA0842001

Pages:

40

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