The Impact of the Euro on Equity Markets: A Country and Sector Decomposition

54 Pages Posted: 1 Jul 2008

See all articles by Lorenzo Cappiello

Lorenzo Cappiello

European Central Bank (ECB)

Arjan Kadareja

European Central Bank (ECB)

Simone Manganelli

European Central Bank (ECB)

Date Written: June 23, 2008

Abstract

This paper investigates whether comovements between euro area equity returns at national and industry level have 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 has augmented. By explicitly controlling for the impact of global factors, we show that this result cannot be explained away by recent world-wide trends. A more refined analysis based on an industry breakdown suggests that the increase in national index comovements is mainly driven by financial, industrials and consumer services sectors.

Keywords: National and industry equity returns, euro, conditional comovements, regression quantiles

JEL Classification: F36, G15, C22

Suggested Citation

Cappiello, Lorenzo and Kadareja, Arjan and Manganelli, Simone, The Impact of the Euro on Equity Markets: A Country and Sector Decomposition (June 23, 2008). ECB Working Paper No. 906, Available at SSRN: https://ssrn.com/abstract=1138602

Lorenzo Cappiello (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 8765 (Phone)

Arjan Kadareja

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Simone Manganelli

European Central Bank (ECB) ( email )

Kaiserstrasse 29
Frankfurt am Main, 60311
Germany

HOME PAGE: http://www.simonemanganelli.org

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