Dissertation: Analyzing Convergence/Divergence in European Financial Markets

Analyzing Convergence/Divergence in European Financial Markets

- in englischer Sprache -

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Schriftenreihe volkswirtschaftliche Forschungsergebnisse, Band 173

Hamburg , 162 Seiten

ISBN 978-3-8300-6125-0 (Print) |ISBN 978-3-339-06125-6 (eBook)

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The European Union implemented significant financial reforms in order to facilitate financial integration since the beginning of the 1980s. With the introduction of the euro, the process of integrating financial markets accelerated. All the restructuring efforts reflect an expectation of positive effects from a single financial market in the European Union. However, an interconnected financial system creates challenges as well. It is crucial to investigate the process of financial integration in different market segments individually in order to take full advantage of it while, at the same time, circumventing potential hazards.

At this point, one needs some tools to measure the degree of financial integration in the EU. In this study, the author employs price-based methods as the means to show implications of the direction of financial integration. The author tests for price convergence in European equity markets in order to quantify the direction of market integration at both the aggregate and sectoral levels. In addition, the author investigates the sovereign bond yield differentials that reappeared with the outbreak of the financial crisis in 2007 following a period of convergence when the euro was introduced. She performs her analysis in a time-varying framework in view of the dynamic path of altering pricing behaviour in financial markets. Further, a methodological contribution to the literature by applying new methods to financial data is offered, namely beta- and sigma-convergence approaches, a nonlinear factor model and a semiparametric fixed effects panel data model with time-varying coefficients.

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